Issue 1B:
Does
DEF's petition and associated tariffs comply with the requirements of Section
366.043, Florida Statutes?
Recommendation:
Staff recommends that the Commission deny DEF’s
proposed tariff as filed, with leave to refile, on two grounds. First, the
tariff excludes customers who meet the statutory definition of a large-load
customer but do not request firm service. Second, DEF has not adequately
demonstrated that service under the existing GSD-1 and GSDT-1 rate schedules,
together with the proposed contractual and financial protections, reasonably
ensures that each large-load customer bears its own full cost of service as
required by Section 366.043(3)(a), F.S. DEF should be permitted to refile
tariff provisions covering all customers who meet the statutory definition and
a proposed large load rate schedule with adequate cost support.
Alternatively, if the Commission finds
that DEF’s existing rates and proposed protections collectively satisfy the
full-cost-of-service and no-cost-shifting requirements, it could approve the cost-recovery
framework while requiring DEF to revise the tariff’s applicability to include
all customers who meet the statutory definition. Approval as filed would
require affirmative findings that both the tariff’s applicability and its
cost-recovery provisions comply with the statute. (Thompson, Crawford)
Position
of the Parties
DEF:
Yes.
Section 366.043 requires DEF to file a large load tariff meeting minimum tariff
and service requirements that reasonably ensure that each large load customer
bears its own full cost of service and that such cost or the risk of nonpayment
of such cost is not shifted to the general body of ratepayers. DEF’s proposed
tariffs include coordinated cost responsibility and risk mitigation mechanisms
to satisfy the statute’s objectives.
OPC:
No. At
a minimum, the failure to design a large load customer-specific rate and the
attempted resort to an existing rate fails to comply with the requirements of
section 366.043, Florida Statutes. DEF’s proposed CIAC modifications, LLCA,
LLCP, and grandfather clause also fail to contain sufficient protections to
ensure that the risk that the nonpayment of large load customer costs will not
be borne by the general body of ratepayers.
FL
Rising:
No.
Section 366.043, Florida Statutes, contains several mandates to ensure such costs
are not passed to the general body of ratepayers, and Duke’s petition and associated
tariffs fall well short of those requirements, with no assurance at all that the
general body of customers will not be paying the costs for large load
customers, among other violations of the statutory requirements
Joint
Customers:
Yes.
DEF’s as-filed petition and tariffs comply with Section 366.043, F.S.
Staff
Analysis:
Background
Section
366.043, F.S., is a newly enacted statute that went into effect on July 1,
2026. The statute acknowledges that “uniquely large electrical loads” impose a
“disproportionate risk on the other ratepayers of this state.” This heightened
risk requires “the commission to develop and enforce rate structures and other
policies for such customers which ensure such risk is mitigated as much as
possible and prevent shifting the costs of serving large load customers to the
general body of ratepayers.”
This
recommendation presents alternative applications of Section 366.043, F.S., to
DEF’s proposed large load tariffs. The statute creates multiple questions for
Commission consideration. In order as presented by the statute, those questions
are:
-
Does DEF’s tariff apply to the same customers that the
statute describes? Staff analyzes this under the “Definitions” subheading
below.
-
Do DEF’s existing rates, together with the proposed
protections, reasonably ensure that each large load customer bears its own full
cost of service? Staff analyzes this under the “Statutory Requirements for Each
Large Load Customer” subheading below.
-
What can the Commission consider when deciding whether
to approve or deny the tariff? This is the focal point of the parties’
arguments that largely revolve around incremental generation costs. Staff
analyzes this under the “Tools for Commission Consideration” subheading below.
Definitions
Section
366.043(2), F.S., contains definitions of multiple terms used in the statute.
At issue under this subsection is the question of who qualifies as a large load
customer. Within that issue are two direct questions: (1) does the statute
allow DEF to only have protections in place for firm load and (2) how is
peak demand calculated?
Does
Section 366.043, F.S., allow DEF to only have Protections for Firm Load?
Subsection
(2)(d) of the new statute defines large load users as “customers with an
anticipated monthly peak load of 50 megawatts (MW) or more, calculated as the
highest average load over a 15-minute interval at a single location.” DEF’s
proposed tariff, however, applies only to customers with an anticipated monthly
peak of 50 MW or more of firm load. Consequently, any potential or
existing customers that would qualify under the statute (e.g. a customer taking
or requesting 100 MW of interruptible load) would not be subject to any
provisions or protections provided in the proposed tariffs.
DEF argues
that because the different service profiles require materially different
planning and investment risks, the distinction of firm load is reasonable. (DEF
BR 30-32). Staff is not convinced by the evidence in the record. Although DEF’s
planning and investments may change based on whether customers are seeking
firm, interruptible, or curtailable load, nothing in the statute supports any
such distinction. To the contrary, the statute does recognize the
existence of interruptible and curtailable service profiles but did not apply any qualifier to the
50 MW demand threshold. This means that for a customer requesting 100 MW of interruptible
service under DEF’s proposed tariff, DEF could interrupt service under agreed
conditions, which would meet the statutory definition of a large load customer but
would still fall outside the language of DEF’s proposed large load protections.
The statute is designed to protect the general body of ratepayers and to
mitigate risks associated with large electrical loads. Differences in planning
and investment risks may justify different tariff terms for firm and
interruptible customers, but they do not justify excluding customers who meet
the statute’s definition of a large load customer.
Staff
recommends that DEF’s proposed tariff be denied on this basis with leave to
modify Section 13.01 of the tariff to include all customers with an anticipated
monthly peak load of 50 MW or more.
How
is Peak Demand Calculated?
Section
366.043(2)(d), F.S., also clarifies that the peak demand is “calculated as the
highest average load over a 15-minute interval at a single location.” DEF’s
proposed tariff, however, calculates peak demand as the “highest total demand
indicated in any 30-minute interval during the month.”
Although the
language of the proposed tariff does not facially align with the language of
the statute, the version offered by DEF provides more protection for the
general body of ratepayers than the statute does. The statutory language relies
on an average whereas DEF’s language relies on a single peak moment. It is not
possible for a customer to qualify as a large load user under the statutory,
15-minute definition without also qualifying under DEF’s 30-minute window.
However, it would be possible for a customer to qualify under DEF’s version –
and thus be subject to the protections included in the proposed tariffs – that
does not qualify under the statute.
Because
DEF’s interval timing calculation provides more protection than required by the
statute, staff does not recommend denying the tariff on these grounds.
Statutory
Requirements for Each Large Load Customer
The core of
the new statute lies in subsection (3) which states:
(3)
The following minimum tariff and service requirements for large load customers
are required in public utility tariffs:
(a) The
minimum tariff and service requirements must reasonably ensure that each large
load customer bears its own full cost of service and that such cost is not
shifted to the general body of ratepayers. Such cost of service includes, but
is not limited to, connection, incremental transmission, incremental
generation, and other infrastructure costs; operations and maintenance
expenses; and any other costs required to serve a large load customer. The risk
of nonpayment of such costs may not be borne by the general body of ratepayers.
(b) The
minimum tariff and service requirements must include provisions reasonably
designed to prevent a public utility from providing electric service to a
customer that would otherwise qualify as a large load customer if that customer
is a foreign entity.
These are
requirements that must be in place as mandated by the Legislature. The
following analysis goes through both subsections in order.
Minimum
Tariff and Service Requirements
Subsection
(3)(a) provides that – at a minimum – a large load tariff must reasonably
ensure that a large load customer bears its own full cost of service and
that those costs are not shifted to the general body of ratepayers. DEF claims
that the proposed tariffs in this docket meet the statutory requirements by
virtue of the rate freeze established in the 2024 Settlement Agreement. DEF argues that, because of the rate
freeze, the general body of ratepayers cannot pay for the costs of service for
a large load customer. Staff agrees that, as currently filed, no costs from the
possible service of large load customers can be shifted to the general body of
ratepayers until DEF’s next general base rate case when a new cost of service
study is filed. Once DEF’s next rate case is filed, it
would again be an issue as to whether any costs of service are being shifted to
the general body.
However,
staff believes that the rate freeze only addresses half of the statute. The
other half of the statute – that each large load customer bears its own full
cost of service – remains an open question. As currently proposed by DEF, large
load customers would be placed on the GSD-1 or GSDT-1 rate schedules.
DEF did not
offer a new rate for large load customers in this proceeding, opting instead to
defer the creation of a new rate class until its 2027 rate case. However, staff
believes that the 2024 Settlement Agreement did not prevent DEF from proposing
a large load rate schedule to comply with the new statute. DEF expressly
acknowledges that the agreement would permit it to change its rates in response
to Section 366.043, F.S., but maintains that such changes are unnecessary
because its proposed framework already complies with the law. (DEF BR 10)
Accordingly, reliance on GSD-1 and GSDT-1 through 2027 represents DEF’s chosen
approach, rather than a restriction imposed by the settlement.
That
distinction matters because the 2024 Settlement’s rate freeze does not resolve
whether each large load customer will bear its own full cost of service. DEF’s
commitment that shareholders will absorb any unrecovered costs during the
settlement period provides protection to the general body of ratepayers. (TR
115, 149, 232; DEF BR 10–12) However, shareholder absorption of a shortfall
does not itself demonstrate that the large load customer pays its full cost.
Staff believes that the Commission therefore must evaluate whether the existing
rates, together with the proposed tariff protections, reasonably ensure the
customer’s full cost responsibility.
No evidence
was provided by the utility to establish that these rates affirmatively cover
the cost of serving each large load customer. Instead, the utility offered
assurances that these costs will be revisited in the 2027 rate case. DEF cannot
rely on the settlement as a reason to defer an otherwise necessary rate
modification until 2028. The evidence provided in this record does not
establish that its proposed framework satisfies subsection (3)(a) and the Settlement
does not prevent DEF from proposing a supported large load rate schedule to
address that deficiency. Therefore, staff recommends that the tariff be denied
for lack of evidence to establish that each large load customer bears its own
full cost of service.
Foreign
Entity Prohibition
Subsection
(3)(b) requires that the tariff must be reasonably designed to prevent the
utility from providing large load service to a foreign entity. DEF’s proposed
tariffs acknowledge that the utility is prohibited from providing service to
any customer that would qualify and requires an affidavit from the potential
customer to attest that it is not a foreign entity.
OPC argues
that the affidavit alone – without independent verification – is a rubber stamp
that falls short of the statutory requirements. (OPC BR 17) Staff disagrees.
The statute requires that the tariff be reasonably designed to prevent service
to a foreign entity. The tariff is designed in a way that identifies the
prohibition on service and includes a method of enforcement on the customer
while also requiring DEF to have that attestation in order to proceed. The
statute does not impose a requirement on any utility to engage in independent
verification or investigation into the customer.
Tools
for Commission Consideration
While
subsection (3) delineates what a tariff must have, subsection (5)
describes how the Commission may ensure that those requirements are met.
Specifically, subsection (5) states:
(5) To
effectuate the requirements of subsection (3), the commission may approve
public utility tariffs that include utility industry-accepted ratemaking and
other financial tools, including, but not limited to, the following:
(a) Contributions
in aid of construction or other required customer infrastructure investments
that may be returned, in whole or in part, to such customers over time.
(b)
Demand charges, including minimum demand charges.
(c)
Incremental generation charges.
(d)
Financial guarantees.
(e)
Minimum load factors.
(f)
Take-or-pay provisions or similar provisions requiring payment for contracted
capacity, regardless of a large load customer’s actual electricity use or
demand.
(g)
Minimum period of service contract requirements, including early termination
fees or other fees for violation of such contracts.
Of these
seven considerations, subsection (c) – the incremental generation charges (IGC)
– make up the majority of the parties’ arguments. Staff addresses the IGC after
analyzing the remaining six factors below.
DEF’s tariff
contemplates and enacts several of these requirements. Per the proposed tariff,
customers seeking to take service are required to pay 100 percent of the total
estimated costs to extend service in advance with those payments refunded over
a period of up to five years as contemplated by subsection (5)(a). DEF also
includes a minimum demand charge as contemplated by subsection (5)(b),
financial guarantees as contemplated by subsection (5)(c), a minimum load
factor as contemplated by subsection (5)(e), a take-or-pay provision in the
form of a minimum bill as contemplated by subsection (5)(f), and a 20-year
minimum term with early termination and other fees as contemplated by
subsection (5)(g). Consequently, six of the seven ratemaking tools identified
in the statute are utilized in DEF’s filing. The only industry-accepted
ratemaking or financial tool that DEF does not employ is (5)(c) – an
incremental generation charge.
The lack of
an IGC is at the core of the arguments raised by OPC and FL Rising in their
briefs. (OPC BR 6-11, 19, 21-24, 29-30, 32; FL Rising BR 5-9, passim) As
noted by DEF in its brief, an IGC is an optional tool that the Commission may
consider when analyzing a tariff under Section 366.043, F.S. (DEF BR 15)
DEF witness
Wishart provided testimony to the advantages and disadvantages of average
embedded cost ratemaking when compared to incremental cost ratemaking. He
testified:
The
primary concern associated with using the embedded cost of service approach,
particularly with regard to new large customers, is that due to the currently
high cost of generation capacity and other infrastructure, there is the
potential for average rate increases that would be borne by all customers.
The
primary strength of the incremental cost of service approach is that it may
prevent unwanted cost shifts between new and existing customers.
This is
precisely what Section 366.043, F.S., is intended to address. Although the
average embedded cost of service methodology “has resulted in stable rates and
charges that have long been deemed just and reasonable,” witness Wishart also
testifies that these are unprecedented times.
Meanwhile,
the advantages for the embedded cost methodology are consistency, fairness
across customer groups, and avoiding the “perception of unfairness” from an
incremental cost approach. Regardless of those perceptions, Section 366.043,
F.S., is what instructs the Commission on how to consider these customers and
tariffs to serve them.
DEF did not
propose a new rate class or associated rate schedule for large load customers
in this proceeding, and the intervenors argue that an IGC would have addressed
that gap. (TR 71-72; 138) While an IGC could be part of DEF’s future rate case
filing, without persuasive testimony supporting a cost allocation methodology
or other cost support demonstrating how an IGC would operate and satisfy the
statutory requirements, staff is unable to recommend whether an IGC is
appropriate at this time. If the Commission exercises its discretion to require
DEF to include an IGC in its tariff, DEF would need to file supporting
testimony and cost information demonstrating how the proposed charge satisfies
Section 366.043, F.S. Staff’s recommendation to deny the tariff as filed relies
on the evidence in the record before the Commission in this proceeding and the
statutory requirements of Section 366.043, F.S.
Alternatives
This docket
is a case of first impression. Section 366.043, F.S., went into effect on July
1, 2026, and has never been interpreted by the Commission. If the Commission
disagrees with staff’s recommendation, staff recognizes that DEF has
acknowledged that any costs not borne by prospective large load customers would
be borne by the shareholders as opposed to the general body of ratepayers.
Returning
to the text of the statute, Section 366.043(1), F.S., states:
The Legislature further finds that when
one class of electric service customer requires uniquely large electrical loads
at a single location, it imposes a disproportionate risk on the other
ratepayers of this state and makes it necessary for the commission to
develop and enforce rate structures and other policies for such customers which
ensure such risk is mitigated as much as possible and prevent shifting the
costs of serving large load customers to the general body of ratepayers.
(emphasis added). The Commission is
granted discretion by the Legislature in how to mitigate that risk and protect
the general body of ratepayers. DEF’s rate freeze protects existing customers
from base rate increases through the end of 2027. The Commission may find that temporary
protection, together with the proposed contractual safeguards, satisfies the
statute’s “reasonably ensure” standard on the present record and permits
interim approval pending consideration of supported large load rates in DEF’s
anticipated 2027 rate case. On the other hand, staff believes that
the Commission could find that while DEF has demonstrated its proposal contains
customer protections, the statute does not afford DEF with the flexibility to
postpone inclusion of a rate schedule (supported by evidence on cost
responsibility) in its tariff until a future rate case.
Conclusion
Staff
recommends the Commission should deny the tariff as filed on two grounds:
first, because DEF’s tariff applies only to firm load without statutory
justification to do so and, second, because the evidence introduced at hearing
does not establish that the proposed framework reasonably ensures that large
load customers will bear their own full cost of service as required by Section
366.043, F.S. If the Commission agrees with this interpretation, it should deny
the tariff with leave for DEF to revise its applicability provisions and file a
rate schedule with adequate cost support.
Alternatively,
the Commission may interpret the statute’s “reasonably ensure” standard as
permitting a framework based on existing rates, the settlement’s protections,
and the proposed contractual safeguards, pending consideration of supported
large load rates in DEF’s anticipated 2027 rate case; an interpretation that is
arguably in line with the statutory directive to “ensure risk is mitigated as
much as possible.” Under that interpretation, the Commission could deny the
tariff with leave for DEF to refile with modifications to its applicability
provisions to include non-firm load (such as the requirement to apply to all
load profiles instead of just firm load). Approval as filed would require
affirmative findings that both the tariff’s applicability and its cost recovery
provisions comply with the statute. Any approval should expressly require DEF
to propose a large load rate schedule(s) and reserve the Commission’s
discretion to independently evaluate the large load rate schedule(s) and
related tariff provisions based on the evidence presented in the next rate
case.
Issue 1:
Should
the Commission approve, deny, or deny with leave to refile with modifications
the proposed Large Load Customer Policy (Tariff Sheet Nos. 4.130-4.132) and the
associated terms and conditions (e.g., minimum term, minimum monthly bill,
security requirements, early termination, and special terms provision)? If
denied with leave to refile, what should the modifications be?
Recommendation:
If the
Commission in Issue 1B finds that DEF’s petition and associated tariffs do not
meet the requirements of Section 366.043, F.S., this issue is moot.
If the
Commission in Issue 1B votes that DEF’s petition and associated tariffs do meet
the requirements of Section 366.043, F.S., staff recommends that the Commission
should deny the tariffs with leave to refile the Large Load Customer Policy with
the following three tariff modifications. First, DEF should remove the word
“firm” from Section 13.01. Second, DEF’s proposed calculation of the security
amount should be denied. DEF’s security amount should be based on two months of
minimum bills (Section 13.04). Finally, DEF’s proposed provision that would
allow the Company to negotiate different non-material terms without Commission
review and approval should be denied (Section 13.06). DEF should only be
allowed to negotiate different terms that are purely administrative in
nature. Staff recommends approval of all
other LLCP provisions.
If the
Commission approves DEF’s LLCP as proposed, without modifications, no changes
would be needed to the tariffs. (Guffey, G. Davis)
Position
of the Parties
DEF:
The
Commission should approve, without modifications, DEF’s proposed LLCP. The
Company’s proposal ensures that large load customers bear appropriate costs in
the near term through CIAC requirements, minimum bill obligations, termination
provisions, and related contractual protections. These mechanisms provide
meaningful cost responsibility without requiring the Commission to adopt a
rigid, customer-specific allocation model that does not reflect system
realities.
OPC:
The
Commission should deny the proposed LLCP and its associated terms and
conditions for not having sufficient protections. If the Commission denies the
LLCP with leave to refile with modifications, then the Commission should strip
DEF of the discretion to negotiate changes to provisions without total
oversight by the Commission, strengthen the early termination policy and
security collateral requirements, and make any other changes deemed necessary
to protect the general body of ratepayers.
FL
Rising:
The
Commission should deny the proposed LLCP or, in the alternative, deny with leave
to refile, provided that the new filing contains a separate rate class for
large load customers, the minimum monthly bill is adjusted to ensure that it
recovers the full costs of serving large load customers, and the security and
early termination provisions are revised to include a higher security payment
and Termination Payment Obligation or Termination Fee.
Joint
Customers:
The
Commission should approve the as-filed LLCP. However, if the Commission decides
to adopt modifications that would result in the LLCP applying to existing DEF
customers, then the LLCP needs to be revised to establish an existing customer
tier.
Staff
Analysis:
The
proposed LLCP tariff contains eight sections. The sections are as follows:
13.01
General
13.02 Term
13.03
Determination of Minimum Monthly Bill
13.04
Security Requirements
13.05 Early
Termination
13.06
Special Terms
13.07
Contribution in Aid of Construction (CIAC)
13.08
Customer Rate
Each
section, except for Section 13.07, CIAC provision, is discussed below. The CIAC
provision is discussed in Issue 3.
LLCP
Section 13.01 General
Section
366.043(2)(d), F.S., defines a large load customer as “customers with an
anticipated monthly peak load of 50 MW or more, calculated as the highest
average load over a 15-minute interval at a single location.” Section 13.01 of
the proposed LLCP provides the general terms and applicability for large load
customers. The general terms include the monthly maximum demand requirements, a
grandfather clause, system impact study fees, a liability waiver for securing
necessary rights-of-way, permits, equipment for electric service, and the
foreign entity clause, as defined by Section 366.043(2)(c), F.S. The
applicability, grandfather clause and system impact study fees are discussed
below.
Applicability
of Firm Load Customers
Section
13.01 states that the LLCP applies to “any individual Customer, for either a
new or expanded facility, with an aggregate Peak Contract Demand forecast
reasonably expected to be equal to or in excess of a Monthly Maximum Demand of
fifty thousand (50,000) kilowatts of firm (i.e., not Interruptible or
Curtailable) load, at a single location including co-located load, any time
during the Minimum Term.” (EXH 2, MPN C1-19)
DEF’s
proposed tariff defines large load customers as 50 MWs or more of firm load. (TR
135, TR 137, TR 143) DEF witness Chatelain explained upon cross examination
that the firm load requirement is reflective of the Company’s obligation to
serve a firm customer versus a non-firm customer. (TR 143) Witness Chatelain
further explained that DEF treats the investments of assets for a non-firm and
a firm customer differently and the expectation is that large load customers
are requesting firm load. (TR 143-144) Witness Wishart testified that data
centers have backup generators to avoid loss of service. (TR 327) Finally,
witness Chatelain testified that he is not aware of a large load request for
non-firm load, either with DEF or across the country. (TR 144)
OPC in its
brief states that nothing in Section 366.043, F.S., restricts the application
to firm loads. (OPC BR 4, 14, 15) Similarly, FL Rising argues that the new law
contains no exception for interruptible or curtailable customers. (FL Rising BR
10-11) The Joint Customers argue that DEF’s approach is consistent with the
operating characteristics of new data center loads and DEF does not build
generation to serve non-firm load. (Joint Customers BR 19-20)
Consistent
with staff’s recommendation in Issue 1B, staff recommends that DEF’s proposed
tariff be denied with leave to modify Section 13.01 of the tariff to remove the
word “firm” to include all customers with anticipated monthly peak load of 50
MW or more.
Peak
Load Calculation for Applicability of Large Load
Section
13.03 of the LLCP defines the Monthly Maximum Demand for billing purposes as
the highest total demand indicated in any 30-minute interval during the month.
(EXH 2, MPN C1-19) Generally, for all its rate schedules, DEF bills customers
on a 30-minute interval basis. (EXH 16, MPN E3) Section 366.043(2)(d), F.S.,
defines large load customers as “a customer with an anticipated monthly peak
load of 50 MW or more, calculated as the highest average load over a 15-minute
interval at a single location.”
During
cross-examination, witness Chatelain testified that DEF bills “on a 30-minute
interval, so that’s the number that’s reflected from a billing standpoint, but
as far as applicability of the 50-megawatt measure, we fully intend to comply
with the law and evaluate it based on a 15-minute increment…”. (TR 135) Witness
Chatelain argued that the 15-minute increment was only explicit in the
applicability of Section 366.043, F.S., and that billing methodologies were up
to Commission discretion. (TR 136) Witness Chatelain further explained that DEF
would expect large customers to have constant high load, and a 15-minute versus
a 30-minute interval calculation would be very similar. (TR 136) Based on DEF’s
explanations provided and staff’s recommendation in Issue 1B, staff recommends
approval of DEF’s proposed applicability provision in Section 13.01 of the LLCP
tariff.
Grandfather
Clause
In section
13.01 of the proposed LLCP, DEF proposed a grandfather clause. (EXH 2, MPN
C1-19) The grandfather clause states that this “policy will not impose any
additional requirement for customer sites that otherwise meet the Peak Contract
Demand requirements and exist on the Company’s system as of December 31, 2025.”
(EXH 2, MPN C1-19) DEF argues that this treatment is reasonable in light of the
purpose of the new tariff framework, because the LLCP and LLCA are principally
designed to address the incremental planning, investment, and nonpayment risks
associated with committing resources to serve new large loads. (DEF BR 32) DEF
further stated that existing customers are already taking service under
Commission-approved rates and existing contractual arrangements, and the system
has been planned and operated with those existing loads in place. (DEF BR 32)
Witness Chatelain testified that DEF currently has two customers taking service
that are over 50 MW and it is his belief that two customers have been DEF
customers “at least more than 20 years.” (TR 144)
OPC argues
that the grandfather clause fails to comply with Section 366.043, F.S., because
the statute does not authorize such a clause. (OPC BR 16) OPC further states
even without an express prohibition, the concept of a grandfather clause is
incompatible with the purpose of Section 366.043, F.S., because any
grandfathered customer increases the risk that their cost of service will be
borne by the general body of ratepayers, as any customer who has been
grandfathered in may continue to increase their peak load. (OPC BR 16, TR 91)
Upon cross examination, witness Chatelain confirmed that the grandfathered
customers’ monthly peak load could increase after they have been grandfathered
in. (TR 91)
The Joint Customers
argue that the grandfather provision is consistent with the intent of Section 366.043,
F.S. (Joint Customers BR 16) The Joint Customers further state that Section 366.043,
F.S., addresses an anticipated problem attributable to significant new load
additions; it does not purport to retroactively change the rates, terms and
conditions of service for existing customers that the Commission has previously
approved as just, reasonable and in the public interest. (Joint Customers BR
16-17) The Joint Customers also argue that in the absence of clear legislative
intent to the contrary, a law affecting substantive rights, liabilities and
duties is presumed to apply prospectively. (Joint Customers BR 17)
Additionally, upon cross-examination, DEF witness Nelson confirmed his
recommendation that incremental generation costs should be recovered from large
customers would generally not apply to existing large customers. (TR 333-334)
FL Rising
argues that Section 366.043(2)(d), F.S., does not recognize temporal exceptions
to the definition of large load customer, and instead includes all customers
who cross the threshold of an anticipated 50 MW peak demand. (FL Rising BR 11) FL
Rising further explains that DEF’s release of existing customers that otherwise
meet the statutory definition of a large load customer is not permissible under
Section 366.043, F.S. (FL Rising BR 11) Additionally, FL Rising notes that DEF
itself admits the current customers could ramp up their peak demand after
qualifying for grandfathering without losing that status, allowing
grandfathered customer to expand their operations and demand to supply a data
center without the LLCA and LLCP being applicable. (FL Rising BR 11)
Staff believes
that grandfathering the two existing customers, who have been on DEF’s system
for at least 20 years, is reasonable because the customers have been paying
DEF’s base rates and contributing to the system costs. However, the grandfather
clause should only apply to the existing load of the two grandfathered
customers. As stated by OPC in its brief and confirmed by witness Chatelain,
the grandfathered customers could increase their monthly peak load and any
additional investments to serve the customer would potentially be at the
expense of the general body of ratepayers. Therefore, staff recommends that if
a grandfathered customer increases their monthly peak load (beyond the peak
load that exists on DEF’s system as of December 31, 2025), the customer should lose
the grandfather exception and be subject to the LLCP and associated LLCA.
System
Impact Study Fee
Section
13.01 also requires applicable customers to pay a non-refundable system impact
study fee of $150,000. (EXH 2, MPN C1-19) DEF asserted that the system impact
study fee is not negotiable, and a customer must pay it. (EXH 21, MPN E38) DEF
states the purpose of the system impact study is to “support the Company’s
initial analysis and engineering costs to determine the investments and
upgrades necessary to serve the Customer’s proposed load.” (EXH 2, MPN C1-19)
In response to interrogatories from staff, DEF explained that “A primary
purpose of the required system impact study is to identify any interconnection
upgrades needed to maintain system reliability before service is provided.”
(EXH 21, MPN E37) In response to OPC interrogatories, DEF explained that the
utility does not track internal costs to complete the system impact study. (EXH
58, MPN F2-5)
To date, DEF
has completed 14 system impact studies for retail large loads. (EXH 58, MPN
F2-5) DEF provided the cost of third-party resources for the studies in
discovery. The response shows that one study cost $254,000 and the remaining 13
studies cost between $130,000 and $139,997. (EXH 58, MPN F2-5 - F2-6). Based on
DEF’s actual costs for studies incurred to date, staff recommends that DEF’s
proposed $150,000 fee is reasonable and should be approved.
Conclusion
for Section 13.01
Based on the above, staff
recommends that DEF’s proposed tariff be denied with leave to modify Section
13.01 to remove the word “firm” to include all customers with anticipated
monthly peak load of 50 MW or more. Staff recommends approval of all other
provisions of Section 13.01 of the proposed LLCP.
Section
13.02 Term
Section
13.02 in the proposed Tariff Sheet No. 4.130 pertaining to the LLCP, defines
the minimum term of the Large Load Customer Agreement (LLCA) to be 20 years (EXH
2, MPN C1-19), commencing on the date when permanent electric service is
received. This 20-year minimum term may also include a load ramp period. After
the minimum term, electric service under the LLCA shall continue until
terminated by the customer or the Company upon written notification.
DEF
witness Wishart testified that the proposed contract term is at the high end of
the large load tariffs reviewed, which range from 8 to 20 years. (TR 186) In
his testimony, Witness Wishart provided a table comparing minimum contract
terms and load ramp periods for utilities in other states. (TR 182) Witness
Wishart further asserted that the long term of the contract also ensures that
only customers with strong financial backing would be attracted to the LLCA.
(TR 186) With respect to the load ramp period, Witness Wishart explained a load
ramp period would allow customers the opportunity to grow into their maximum
forecasted demand levels. (TR 186) Witness Chatelain explained that a load ramp
period would be a contractually negotiated time schedule between the customer’s
service requested and DEF’s obligation to serve the expected load. (TR 140)
During
cross-examination, DEF witness Chatelain testified that the customer’s
requested load ramp period would be part of an executed LLCA Agreement, with
the details agreed to by DEF and the large load customer specified in Exhibit A
of the LLCA. (TR 93) Witness Chatelain further testified that “a longer load
ramp period provides the company runway to effectively plan what investments
may be needed depending on the service request from the large load customer.” (TR
94) DEF’s proposed tariff does not contain a fixed load ramp period. (TR 94)
Witness Chatelain stated that DEF’s proposal to negotiate the load ramp period
would allow DEF “to invest prudently to serve the requested load at the time
the customer needs the load.” (TR 95)
OPC
stated that the 20-year minimum term may initially seem reasonable as it is one
of the longer terms contemplated by large load tariffs nationally. (OPC BR 17)
However, OPC asserted that, unlike most other tariffs nationally, DEF’s proposal
does not include a provision defining the length of a large load customer’s
load ramp period. (OPC BR 17) Instead, the customer-requested load ramp exhibit
attached to the LLCA is completely blank. (OPC BR 18)
Conclusion
for Section 13.02
Staff
believes that DEF’s proposed 20-year minimum term and negotiated load ramp
period is reasonable. As shown by Witness Wishart’s comparison of other states,
minimum contract terms range from 8 to 20 years, indicating the DEF’s proposed
20-year long term initial commitment is a reasonable measure to insure cost
recovery and protections to the general body of ratepayers. Load ramp period
provisions vary, with some states specifying that load ramp period not to
exceed a certain number of years, while other states allow for a negotiated
load ramp period. Staff finds DEF’s position regarding the needed flexibility
to negotiate a load ramp period persuasive and recommends approval.
LLCP
Section 13.03 Determination of Minimum Monthly Bill
Section
13.03 in the proposed LLCP Tariff Sheet No. 4.130 defines how DEF would
determine a large load customer’s monthly bill. (EXH 2, MPN C1-19) The minimum
monthly bill calculation would be the sum of the customer charge, minimum demand
multiplied by the base demand charges per the applicable base rate schedule, the
minimum billing energy volume (kWh calculated based on the minimum demand
assuming an agreed upon projected load factor), multiplied by the base energy
charges of the applicable rate schedule, all applicable billing adjustments,
such as fuel, taxes, and/or fees. (TR 53)
The
proposed minimum demand ranges from 75 to 85 percent of the annual contract
capacity. The minimum demand would be applied to the applicable demand charge.
DEF witness Chatelain explained that DEF would utilize a minimum demand of 75
percent for all qualifying customers. If DEF determines in the future that a
higher minimum demand percentage is warranted, it will apply the increased
percentage on a going forward basis for all customers. (TR 52; TR 96) The LLCP
does not prescribe at what point DEF would begin contracting large load
customers with a higher minimum demand. (TR 86) In response to discovery, DEF
explained the minimum demand would begin at 75 percent and the range included
in the tariff provides flexibility in the event minimum demand needs to be
adjusted, driven by costs that arise from the Company’s obligation to serve
large load customers. (EXH 4, MPN C3-168; EXH 62, MPN F2-34-35) The tariff
further provides that billing demand would be the higher of the monthly maximum
demand in the current month, 90 percent of the grid demand (defined as the
highest monthly demand in the last 12 months), or the minimum demand (i.e., 75
to 85 percent of contract capacity).
The
calculation of the minimum billing energy volume would also include a minimum
load factor assumption of at least 60 percent, as agreed upon between DEF and
the customer. (TR 53; TR 102; TR 142) Witness Chatelain asserted that the
minimum monthly bill provision creates accountability for the large load
customer by establishing a baseline required energy usage level and discourages
over-estimation of capacity needs when approaching the Company with potential
projects. (TR 52) Witness Chatelain testified that the minimum monthly bill
provisions add a minimum demand and minimum billing energy volume component
that is above and beyond the current DEF rate schedule minimum bill
requirements. (TR 52) DEF witness Wishart testified that, based on other large
load tariffs reviewed, the proposed minimum demand for billing purposes is in
the mid-range of other large load tariffs. (TR 187) To support that statement,
witness Wishart provided a table comparing minimum bill requirements in other
states, which range from 60 to 100 percent of contract demand. (TR 184)
OPC
argued that DEF’s proposed minimum monthly bill calculation is deficient
because the percentage would ultimately be multiplied by the base demand charge
of the applicable base rate schedule, which under DEF’s current proposal would
be either the GSD-1 or GSDT-1 rates, which were designed in the 2024 Settlement
before SB 484 had been introduced. (OPC BR 19; TR 114) OPC concludes that until
DEF implements a large load-specific rate, DEF’s minimum monthly bills do not
cover the full costs of serving large load customers. (OPC BR 19) This failure
to recover large load customer costs shifts the risk of nonrecovery of such costs
to DEF’s general body of ratepayers in violation of Section 366.043, F.S. (OPC
BR 19) OPC further states that by proposing a range of percentages to determine
minimum monthly bills and leaving it to its own discretion as to when to
increase that range, DEF’s proposal increases the risk that the costs of
serving large load customers will be borne by the general body of ratepayers. Nothing
in DEF’s proposal requires DEF to increase the minimum demand percentage to
recover those costs. (OPC 18-19)
FL Rising’s
witness Rábago testified by putting the large load customers on the GSD-1 and
GSDT-1 rates, the minimum bill would be nowhere near the revenue needed to
match the costs associated with the incremental and embedded transmission,
generation, operating, and maintenance costs. (TR 372) FL Rising reiterated the
position in its brief, stating that the GSD-1 and GSDT-1 rates do not
reasonably ensure that such large customers pay for all costs required to
serve. (FL Rising BR 9)
Conclusion
for Section 13.03
DEF
committed to filing a large load rate schedule for Commission approval
effective January 1, 2028, at which point the GSD-1 and GSLD-1 rate schedules
would no longer be the applicable rate schedules for a large load customer.
Witness Chatelain testified that DEF would file a cost of service study in its
next rate case that would include projections for large load customers. (TR
138) A minimum demand charge should incentivize accurate load estimates and
provide protections to the general body of ratepayers. As DEF witness Wishart
testimony shows, large load tariffs in other states demonstrate a range of
minimum billing demands from 60 to 100 percent. DEF’s proposed minimum bill
provisions for the interim period are reasonable and staff recommends that they
should be approved, because they fall within the range of minimum billing
demand requirements in utility proposals in other states.
LLCP
Section 13.04 Security Requirement
DEF’s
proposed security requirements are incorporated in Section 13.04 of the
proposed LLCP. (EXH 2, BSP C1-21, Tariff Sheet No. 4.131) Generally, a security
requirement, or collateral, is an essential risk management tool to protect the
general body of ratepayers and the utility’s exposure.
Witness
Chatelain explained in direct testimony DEF’s proposed security requirement:
The proposed security provisions will
require that potential large load customers secure their financial obligations
to the Company by providing certain financial amounts (the “Security Amount”).
The Security Amount is calculated by applying a certain percentage of the
applicable termination payment (the “Security Percentage”) to the Termination
Fee. The Security Percentage generally depends on the size of the required
Termination Fee and the customer’s creditworthiness (i.e., customers with a
higher credit rating will receive a lower Security Percentage). However, if the
Termination Fee is greater than $100M, the Security Percentage will be no less than
10 percent.
(TR
55) The security requirement can be provided in the form of an irrevocable
letter of credit or cash. Customers also have the option to provide a parent
guaranty in order to reduce the security percentage. The security amount required
could change if any of the formulaic variables change. Possible changes include
a change in the customer’s credit rating, which could change the security percentage,
or a change in rates, which could change the applicable termination fee
calculation. (EXH 16, BSP E4)
DEF
witness Wishart provided a summary of collateral/security requirement
provisions for utility proposals in certain other states. (TR 183) Witness
Wishart testified that DEF’s proposed variable security percentage, which is
applied to the termination payment, is “a unique aspect of their LLCP.” (TR
187) Witness Wishart recognized that most other proposals reviewed required a
specific security amount, with some exceptions for customers with high credit
ratings and sufficient liquidity. (TR 187) Witness Wishart testified that the
“. . . Company’s approach retains some flexibility in its contract terms that
will allow it to tailor security requirements to each prospective customer.”
(TR 187) Staff believes that, based on the security requirement provisions for
utility proposals provided by witness Wishart, other states include less
flexibility and are more specific.
OPC
witness Nelson disagreed with DEF’s proposed security requirement. Witness
Nelson advocated that the Commission direct DEF to refile the large load
proposal to “require DEF to replace its open-ended, negotiated security
collateral provision with clear and specific parameters set at a higher
level-security collateral equal to 24 months of minimum bills based on the
customer’s planned post-ramp peak demand.” (TR 258) Witness Nelson
contended that DEF’s proposed security policy allows far too much case-by-case
negotiation and too much discretion by DEF and the only detail in the policy is
the 10 percent security percentage threshold at an early termination fee of
$100 million. (TR 311) Witness Nelson asserted that “the Company can set
whatever security percentage it negotiates with the customer, with no input
from the Commission, outside stakeholders, or other customer groups.” (TR 311)
Witness
Nelson testified that while other large load tariffs include a broad range of
security collateral provisions, certain utilities have specific security
policies that have significantly higher requirements. (TR 312) Therefore, OPC
advocates that the LLCP be amended to require security collateral equal to
months of minimum bills, based on a customer’s planned peak post-ramp period
demand. (TR 313) OPC asserted that the security requirements reflected in
DEF’s LLCP represent another instance of the Company giving itself too much
negotiating discretion at the potential expense of its general body of
ratepayers. (OPC BR 20)
Witness
Rábago similarly testified that DEF’s security provision does not provide
sufficient assurance that the stranded costs of a potential early termination
are fully recoverable from the large load customer. (TR 379)
DEF
witness Chatelain rebutted OPC’s testimony by testifying that the security
provision is not intended to serve as the sole mechanism for securing recovery,
but “rather to provide reasonable financial assurance that is aligned with the
customer’s risk profile and existing protections.” (TR 76)
Conclusion
for Section 13.04
Staff agrees
with OPC that the tariff does not specify the percentage of the applicable
termination payment DEF would seek as security. The only fixed term is that the
security percentage threshold would be 10 percent at an early termination fee
of $100 million. The percentage would depend on the size of the termination fee
and the customer’s credit worthiness, which provides no transparency to the
Commission as to what the security amount would be. While staff acknowledges
DEF’s emphasis on the need for flexibility, staff believes the tariff as
proposed provides DEF with too much flexibility. The security requirement is an
essential contract structure to ensure that the general body of ratepayers is
adequately protected if large-load customers disconnect early, before the
expiration of the minimum term.
Therefore,
staff recommends that the security provision be denied as filed. DEF should be
given the option to refile the LLCP tariff and include a security provision as
recommended by OPC witness Nelson, which would be a collateral equal to 24
months of minimum bills based on the customer’s planned post-ramp peak
demand.
LLCP
Section 13.05 Early Termination
Section
13.05 in the proposed LLCP Tariff Sheet No. 4.131 defines the early termination
provisions that would apply to large load customers. (EXH 2, MPN C1-21) DEF
witness Chatelain testified that under the early termination provisions of the
LLCP, once the customer begins taking service, the customer shall provide
written notice to the Company no later than two years prior to the requested
date of termination of service. (TR 54) The tariff provides that in such event,
service under the LLCA shall automatically terminate on the date following the
second annual anniversary of the date of the customer’s termination notice. DEF
witness Chatelain testified that the written notice helps “ensure that the
Company has sufficient time to plan for the load reduction in a manner that
minimizes impacts on existing customers and non-participants.” (TR 54)
If
the customer terminates service before expiration of the original 20-year
contract term and provides the required 2-years notice, after reaching full
load ramp, the customer shall be responsible for payment of a termination fee.
The termination fee is calculated based on a formula. (TR 103) Specifically,
the termination fee is equal to three years, or 36 months, of minimum monthly
bills, plus the net book value of new facilities referenced in section 13.07 of
the LLCP, less any refundable portion of the upfront CIAC payment, which has
not yet been refunded. (TR 54; TR 103) The new facilities referenced in section
13.07 are any facilities that were subject to the CIAC provision. (TR 103)
Witness Chatelain further testified that “Together, the early termination and
minimum monthly bill provisions help protect the Company’s other customers from
bearing the burden of potential stranded costs or underutilized assets due to
the potential disappearance of or reduction in load if a large load customer
project does not materialize or maintain its load as expected.” (TR 55)
If
a customer terminates the LLCA before reaching full load ramp, the customer
must pay the Company its actual costs incurred to provide service, referred to
as “Termination Payment Obligation” in the tariff. (EXH 2, MPN C1-21; TR
102-103) The proposed LLCA (original sheet No. 7.512) refers to actual costs
incurred or committed by the Company as costs associated with the work in
preparing to provide electric service to the site. (EXH 2, MPN C1031) In
response to discovery, DEF explained that actual costs may include
customer-specific facilities, service-extension costs, and incremental
generation, transmission, or other system investments undertaken to accommodate
the customer’s anticipated load. (EXH 22, E43; EXH 28, MPN E179) If the
customer terminates service before the end of the required 2-year notice
period, the customer would be subject to “Termination Delay Damages” in
addition to the termination fee described above. (TR 54)
Section
13.05 of the LLCA tariff further provides that if a customer is permitted to
change rate schedules and selects to receive service under another applicable
Company firm rate schedule, no termination fee shall be applied, but the terms
of the LLCA with respect to the minimum monthly bill shall apply until the
expiration of the original contract term; at the end of the original contract
term, the LLCA should be amended to reflect the appropriate minimum monthly
bill under the new firm rate schedule. (EXH 2, MPN C1-21) The customer could
not avoid the calculation of the minimum monthly bill or the other requirements
set forth in its initial LLCA by changing rate schedules. Additionally, the
Company may terminate service under the LLCA at any time if the customer
materially breaches the terms and conditions of its rate schedule, this policy,
the LLCA, or the Company’s tariff on file with the Commission.
In
his testimony, DEF witness Wishart provided a table comparing security
requirements and exit-fee provisions for other utilities in other states. (TR
183-184) Witness Wishart testified that most proposals combine credit/security
requirements – often tied to parent-company guarantees, letters of credit, or
cash collateral – with exit fees equal to a fixed number of months’ minimum charges,
commonly 36 months. (TR 183) Witness Wishart further testified that:
The Company’s requirement that
customers pay 36 months of minimum bills, plus the net book values of the new
facilities subject to the CIAC rule, for early termination, is a strong
deterrent against customers who do not have the expectation of long-term
financial viability. This requirement is common across the other large load
tariffs that I reviewed and will help the Company recover the cost of
investments needed to serve new large load customers.
(TR
187) The Joint Customers argued that there is no rationale for requiring a
20-year service contract, with early termination and exit fees, of an existing
customer that has been contributing to DEF’s cost of service for years or decades.
(Joint Customers BR 17) The Joint Customers further stated that since an
existing load is not imposing any material incremental utility infrastructure
costs, there is no justification for requiring financial security guarantees or
minimum bill provisions because there are no identified incremental
infrastructure costs that could be shifted or stranded. (Joint Customers BR 17)
The Joint Customers finally state that if the Commission decides to adopt
modifications that would result in the LLCP applying to existing customers, the
LLCP must be revised to create an existing customer tier. Specifically, the
Commission should make changes that there should not be an early termination
fee of any kind. The Joint Customers argued that these revisions are necessary
to ensure that the LLCP, if applicable to existing customers, is just and
reasonable. (Joint Customers BR 25)
OPC
argued that DEF’s early termination fees are, by design, structured not to
recoup the full cost of serving an early terminating customer. (OPC BR 6) OPC
further stated that the early termination fees are more lenient than those of
many other utilities. (OPC BR 21) OPC additionally asserted that many large
load tariffs contain an early termination fee of either (1) all minimum monthly
bills for the duration of the contract, or (2) the remaining undepreciated
value of facilities whose costs have been directly assigned to the customer,
whichever is higher. (OPC BR 21) Furthermore, OPC stated that DEF’s proposed
early termination fees for large load customers past their load ramp offers
minimal protection to existing customers because only a small subset of
incremental costs is included in the CIAC and minimum bill provisions. (OPC BR
21) As such, “DEF’s proposed early termination fees do not comply with Section
366.043, F.S., because they increase the risks that the general body of
ratepayers will have to bear the costs of stranded assets built to serve early
terminating large load customers.” (OPC BR 21-22)
OPC
witness Nelson recommended a termination fee equal to customer’s minimum
monthly bills for the entire remaining contract term, regardless of the
contract year in which the customer elects to terminate service. (TR 258)
Witness Nelson compared DEF’s proposed early termination provisions to other
large load policies review, and concluded DEF’s proposal is more lenient than
most other policies reviewed. (TR 309) OPC asserted that an insufficient
termination fee creates risk to existing customers when the physical grid
assets built to serve the customer remain in rate base and “if the company can
not quickly repurpose those assets, their costs will be socialized to customer
groups that do not receive any benefits from them.” (OPC BR 21-22; TR 310)
FL
Rising witness Rábago testified that in the event of early termination of
service, the tariff is inadequate to prevent cost shifting onto other customer
classes, with stranded costs borne by the general body of ratepayers. (TR 363)
Witness Rábago additionally testified that the termination payment obligation
and termination fee leave unrecovered costs on the table to fall onto the
general body of ratepayers in other customer classes. (TR 378) Witness Rábago
asserted that by enforcing the collection of only those costs associated with
the preparation of a site, the additional costs for construction of new power
facilities, operation and maintenance, fuel, and devaluation in investments,
among others, remain unaccounted for. (TR 378)
Conclusion
for Section 13.05
There
is consensus among the parties supporting the general practice of exit or early
termination fees. As shown by witness Wishart’s comparison of other states,
early termination fees range from 36 months of minimum charges to early
termination fees equal to the remaining minimum-bill obligations for the term
of the contract. Therefore, the record supports the 36-month minimum bill
obligation, as proposed by DEF. Based on the testimony provided by DEF, staff
recommends that the proposed early termination fee, two-year notice of
termination, and termination delay damages are reasonable measures of
protections to the general body of ratepayers and provide DEF with a mechanism
with adequate planning time for capacity adjustments, should a customer
terminate service prior to the 20-year minimum contract term. Therefore, staff
recommends approval of Section 13.05 of the LLCP. Therefore, staff recommends
approval of Section 13.05.
LLCP
Section 13.06 Special Terms
Section
13.06 in the proposed LLCP Tariff Sheet No. 4.132 states that:
The Company may negotiate different
non-material terms than reflected in this policy, if those terms do not result
in fewer customer protections than was included in the Large Load Customer
Policy. If the terms in the LLCA differ materially from the approved form
tariff, then Company must submit the executed LLCA to the Commission for review
and approval.
(EXH
2, MPN C1-22) Examples of non-material terms provided by DEF are changes in how
the parties will be notified under the LLCA (paragraph 17), changes to how long
the parties must negotiate in good faith to avoid disputes (paragraph 21), or
changes to the nature of the interconnection (paragraph 3c). (TR 75; TR 132; EXH 16, MPN E1) However, DEF
did not define what the term “non-material” means in the LLCP or in the LLCA.
(TR 106) Furthermore, DEF is the one who decides what non-material means. (TR
106-107) During cross examination, DEF witness Chatelain admitted that it would
be up to the Company to decide if a negotiated term would result in fewer
customer protections (and therefore be material). (TR 108)
Witness
Chatelain testified that if the Company deviated from the LLCA in a material
way, it would submit the negotiated LLCA to the Commission for approval. (TR
58) Examples of material terms are the rate paid, system study impact fee, the
size of the large load customer, the 20-year initial minimum term, minimum
monthly bill calculation (within 75 to 85 percent), security requirements,
requirement to pay full CIAC upfront, foreign entity restrictions, and early
termination (TR 75; TR 133; EXH 21, MPN E38-39). During cross examination, witness Chatelain
testified that he does not believe anything in the LLCP would be considered
non-material and that the non-material terms are limited to terms contained in
the LLCA. (TR 133) He further stated that the Utility will be willing to revise
the proposed tariff to provide an exhaustive list of nonmaterial terms subject
for negotiation to comply with the Commission’s ultimate decision in this docket.
(TR 135)
In
its brief, OPC stated that DEF has allowed “itself sweeping and unconstrained
discretion to amend the terms of the LLCP and the LLCA.” (OPC BR 5) OPC asserts
that allowing DEF to negotiate any term that DEF deems non-material if it does
not result in fewer customer protections is “the worst example of this
self-serving discretion.” (OPC BR 5) OPC further asserts that Section 366.03, F.S.,
requires that utilities provide “service upon terms as required by the
commission.” (OPC BR 12) Because this discretion would only be checked by the
conscience of whoever performs DEF’s large load contract negotiations, it
impermissibly exposes DEF’s general body of ratepayers to the risks of large
load customers not bearing their full costs of service. (OPC BR 22) OPC
recommends that the Commission should therefore deny DEF’s petition. (OPC BR
13)
FL
Rising provides a similar position to OPC, disagreeing with DEF’s proposal to
negotiate different non-material terms, if those terms do not result in fewer
customer protections. (FL Rising BR 11-12)
The
Joint Customers state that if the non-material term is adequately defined,
DEF’s flexibility should not be a barrier for its approval. (Joint Customers BR
11)
Conclusion
for Section 13.06
Consistent
with the analysis and staff recommendation provided in Issues 1A and 1C, staff
recommends that the Commission deny DEF’s proposed tariff provision allowing
the Company to negotiate different non-material terms without Commission
approval. Staff believes the DEF should only be allowed to negotiate different
terms that are purely administrative in nature. Staff believes that changes in
how the parties will be notified under the LLCA (paragraph 17) and changes to
how long the parties must negotiate in good faith to avoid disputes (paragraph
21) would fall under “administrative” changes; however, any changes in the
interconnection agreement, for instance, would fall outside the administrative
nature and should require Commission approval.
LLCP
Section 13.07 Contribution in Aid of Construction (CIAC)
As
discussed in Issue 3, staff recommends that if the Commission approves the
proposed LLCP and LLCA tariffs as filed, the CIAC tariff modifications should
be approved. If the Commission denies the proposed LLCP and LLCA tariffs this
issue is moot. Staff’s recommendation to deny the LLCP tariff with leave to
refile does not impact the CIAC issue.
LLCP
Section 13.08 Customer Rate
The
proposed LLCP provides that until the Commission next resets the Company’s
rates and approves a new large load rate schedule which reasonably ensure that a
customer bears its own full cost of service, the customer shall take service
under the Company’s existing GSD-1 or GSDT-1 rate. Once the new large load rate
schedule is approved, the Customer would be moved to that new rate schedule.
In its brief, DEF stated that the 2024
Settlement fixes DEF’s existing base rates through December 31, 2027, while Section
366.043, F.S., requires DEF to have a compliant large load tariff on file by
October 1, 2026. DEF has therefore proposed an interim framework under which
qualifying large load customers will take service under the existing GSD-1 or
GSDT-1 rate schedule through the end of the Settlement term, subject to the
additional cost-responsibility and financial-risk protections contained in the
LLCP and LLCA. (DEF BR 7) DEF committed to proposing a dedicated large load
rate schedule in its next rate case, or in the absence of a rate case filing,
in a separate standalone filing for approval of a new large-load specific rate
effective January 1, 2028. (TR 197) Such a filing would have to be presented to
the Commission no later than spring 2027. On rebuttal, DEF witness Chatelain
testified that if:
DEF does incur costs, and the GSD-1 and
GSDT-1 rates are not adequate to cover them during the settlement period, those
costs will fall to the bottom line and be borne by DEF shareholders. To be
clear, to the extent such costs are incurred and resulting in DEF falling below
its authorized ROE band, it commits that it will not seek to adjust rates
during the settlement period.
(TR 72) Witness Wishart asserted that
the rates under the GSD-1 and GSDT-1 tariffs are based on a traditional
embedded cost-of-service methodology. (TR 196) Witness Wishart further
testified that there is nothing inherent in the existing GSD-1 and GSDT-1 rates
that makes them inappropriate simply because a customer’s demand exceeds 50 MW.
(TR 197) Witness Wishart does not agree that allowing large load customers to
temporarily take service under the existing GSD-1 and GSDT-1 tariffs in
inconsistent with the requirements of SB 484. (TR 197)
FL Rising witness Rábago testified that
the existing GSD-1 and GSDT-1 are already below parity and subsidized by
residential and small business customers. (TR 363) Specifically, the parity
index approved in the 2024 Settlement for the GSD-1 and GSDT-1 rate classes is
0.91 or 91 percent. (EXH 10, MPN C6-440) Parity is the concept of a rate class
covering its costs to serve. (TR 145) Furthermore, witness Rábago asserted that
the rates were not designed with DEF’s duties under the new legislation to the
general body of ratepayers. (TR 363) By putting large load customers on the
GSD-1 and GSDT-1 rates, witness Rábago concluded that DEF is almost
guaranteeing that large load customers will not be covering the costs needed to
serve them.
OPC argues a similar position, stating that
DEF’s proposal is not fair and reasonable because DEF is proposing to serve
large load customer using rates that were approved in the 2024 Settlement
before SB 484 “had even been introduced in the Legislature.” (OPC BR 8)
Furthermore, the GSD-1 and GSDT-1 rates reflect traditional embedded cost
revenue allocation and do not recover incremental costs. (OPC BR 8; TR 105)
Finally, OPC also asserts that GSD-1 and GSDT-1 rates are unfair and
unreasonable because they are below parity. (OPC BR 8, TR 145)
In response to FL Rising witness
Rábago’s assertions, DEF witness Chatelain rebutted that DEF has not committed
to serving large load data center customers and the “practical realities of
siting, interconnection studies, and infrastructure development all point to a
longer time for large-scale builds.” (TR 402)
Staff agrees with OPC and FL Rising
that the GSD-1 and GSDT-1 rates were approved as part of the 2024 Settlement
and were not specifically designed for large load customers. However, the GSD-1
and GSDT-1 rates represent Commission-approved rates for commercial/industrial
customers, regardless of minimum peak demand. The GSD-1 tariff is applicable to
any customer, other than residential. (EXH 90, MPN F2-538)
Need
for New Generation and Transmission
For
each large load customer, DEF must systematically evaluate specific capacity
and energy needs against its existing grid infrastructure to determine the
exact generating assets required for integration. This
process ensures the Utility maintains adequate reserve margins and complies
with all Commission- and North American Electric Reliability Corporation-mandated
reliability requirements. (EXH 18, MPN E16) For example, according to FL
Rising witness Rábago, under the Commission's approved 20 percent reserve
margin, a 1.0 gigawatt data center requires 1.2 GW of capacity. (TR 369) DEF
witness Borsch testified that the Utility is currently capable of serving a
single 55 MW large load customer before the 2024 Settlement Agreement expires
at the end of 2027. (TR 401-402) In discovery, DEF noted it had received
requests for system impact studies from 13 customers above the 50 MW threshold,
but the smallest of these was 160 MW, which is above the 55 MW currently
available. (EXH 58, MPN F2-5 – F2-6) Therefore, it is likely that new
generation would be required as a result of a new large load customer under the
proposed tariff.
Beyond
assessing generation capacity, DEF must perform steady-state contingency
analyses to protect grid reliability from these large loads. (EXH 101, MPN F4-547)
As testified by DEF witness Chatelain, for each large load customer, DEF plans
and builds its network as an integrated grid to support both system-wide and
customer-specific infrastructure needs. (TR 77) According to DEF witness Wishart,
large load customers must initially fund their own customer-specific interconnection
facilities via a refundable CIAC mechanism. The witness further testified this ensures
fair cost allocation to specific users while keeping the grid adaptable should
those assets eventually benefit the broader network. (TR 192) While DEF's
completed load hosting analysis outlines several substations and transmission
lines that can absorb up to 200 MW of new capacity, demand exceeding this
threshold will trigger system upgrades that are not covered under the CIAC
mechanism. (EXH 18, MPN E15)
Conclusion
for Section 13.08
As
discussed in the executive summary and in Issue 1B, one option for the
Commission could be to find that DEF’s existing rates and proposed protections
satisfy the statue. Pursuant to the 2024 Settlement, base rates are frozen
until the last billing cycle of 2027. Therefore, even if DEF were to sign an
LLCA with a large load customer before December 31, 2027, the general body of
ratepayers would not be impacted. DEF’s approach to temporarily serve any
potential large load customer under the GSD-1 and GSDT-1 rates is reasonable
and should be approved. The new large load rate schedule(s) DEF plans to
propose in 2027 should provide for rates that reflect the full cost of service
to serve large load customers. DEF’s proposal for new large load rate
schedule(s) should also address how investments in new generation and
transmission to serve a large load customer would be recovered.
Conclusion
for Issue 1
The
Commission has three options in this proceeding: (1) approve DEF’s proposed
tariff as filed; (2) deny the tariff; or (3) deny the tariff with leave for DEF
to file modifications. The recommendation addresses these alternatives,
including staff’s recommended tariff modifications concerning the limitation to
“firm” load, the distinction between material and non-material negotiable
terms, and the security requirement.
If the
Commission in Issue 1B votes that DEF’s petition and associated tariffs do not
meet the requirements of Section 366.043, F.S., this issue is moot.
If the
Commission in Issue 1B votes that DEF’s petition and associated tariffs do meet
the requirements of Section 366.043, F.S., staff recommends that the Commission
should deny the tariffs with leave to refile the Large Load Customer Policy
with the following three tariff modifications. First, DEF should remove the
word “firm” from Section 13.01. Second, DEF’s proposed calculation of the
security amount should be denied. DEF’s security amount should be based on two
months of minimum bills (Section 13.04). Finally, DEF’s proposed provision that
would allow the Company to negotiate different non-material terms without
Commission review and approval should be denied (Section 13.06). DEF should only
be allowed to negotiate different terms that are purely administrative in
nature. Staff recommends approval of all
other LLCP provisions.
If the
Commission approves DEF’s LLCP as proposed, without modifications, no changes
would be needed to the tariffs.
Issue 2:
Should
the Commission approve, deny, or deny with leave to refile with modifications
the proposed Large Load Customer Agreement (Tariff Sheet Nos. 7.510-7.530) and
the associated terms and conditions (e.g., minimum demand, minimum term,
minimum demand charge payments, security requirements, and early termination
provision)? If denied with leave to refile, what should the modifications be?
Recommendation:
The Commission’s
vote on the LLCA should be consistent with the Commission’s vote on the LLCP in
Issue 1. The LLCA and LLCP tariffs are together structured to include terms and
conditions applicable to large load customers and any LLCP customers would need
to execute an LLCA. If the Commission denies the proposed LLCP with leave to
refile in Issue 1, the Company should make the corresponding changes to the
LLCA (Ward)
Position
of the Parties
DEF:
The
Commission should approve, without modifications, DEF’s proposed LLCA. The
Company’s proposal ensures that large load customers bear appropriate costs in
the near term through CIAC requirements, minimum bill obligations, termination
provisions, and related contractual protections. These mechanisms provide meaningful
cost responsibility without requiring the Commission to adopt a rigid,
customer-specific allocation model that does not reflect system realities.
OPC:
The
Commission should deny the proposed LLCA and associated terms and conditions.
If the Commission denies the LLCA with leave to refile with modification, then,
at a minimum, the Commission should recommend modifications consistent with the
above.
FL
Rising:
The
Commission should deny the proposed LLCA or, in the alternative, deny with leave
to refile, provided that the security to be rendered is increased and the early
termination provisions are revised to include all costs associated with
servicing a large load customer.
Joint
Customers:
The
Commission should approve the as-filed LLCA. However, if the Commission decides
to adopt modifications that would result in an LLCA applying to existing DEF
customers, then the LLCA needs to be revised as to those existing customers.
Staff
Analysis:
The
LLCA is an agreement between the Company and a customer who is seeking retail
electric service for a proposed facility projected to have new or incremental
load of 50 MW or more at a single location. (EXH 2, MPN C1-21) A customer
taking service under the LLCP tariff must execute an LLCA. (TR 58)
DEF
witness Chatelain testified that the LLCA specifies certain provisions of
electric service, including load characteristics, customer-specific terms,
applicable construction cost recovery terms, and other service details,
including definition of operating procedures based on the Company’s proposed
LLCP. (TR 57-58) The LLCA also requires a customer to provide an affidavit to
the Company attesting that it is not a “foreign entity” as defined in Section
366.043(2)(c), F.S. (TR 117)
Attached
to the LLCA are Exhibits A-F which would be included in a completed and signed
agreement. Exhibit A is the customer-requested load ramp schedule. (EXH 2, MPN
C1-42) Witness Chatelain explained at the hearing that Exhibit A is blank as it
would be filled in on an executed contract with the timing associated with the
customer’s specific requested load ramp period. (TR 93) Exhibit B are the
estimated company costs incurred in preparing to provide electric service to
the site. (EXH 2, MPN C1-43) Exhibit C is the form letter of credit that is
discussed in the security requirements section of the LLCA. (EXH 2, MPN C1-44)
Exhibit D is the form parent guaranty that is also discussed in the security
requirements section of the LLCA. (EXH 2, MPN C1-50) Exhibit E is space for
additional facilities if the customer requests an enhanced level of service, if
applicable. (EXH 2, MPN C1-56) Finally, Exhibit F is space for additional
provisions, if any. (EXH 2, MPN C1-57)
DEF
witness Chatelain testified that the LLCA appropriately establishes a uniform
framework that allows the Company to negotiate in good faith with prospective
large load customers to accommodate project specific priorities and service
objectives. (TR 58) Witness Chatelain additionally asserted that the LLCA terms
protect the Company and existing customers from undue risk of stranded
investment. (TR 58)
OPC
argues that throughout the proposed LLCP and LLCA, DEF has arrogated itself
sweeping and unconstrained discretion to amend the terms of those documents.
(OPC BR 5) OPC further stated that the worst example of this self-serving
discretion is a provision in the LLCA’s special terms section which would allow
DEF to negotiate any term that DEF deems is “non-material” if doing so doesn’t
result in “fewer customer protections.” (OPC BR 5) Staff addresses the
non-material provisions of the LLCP and LLCA in Issue 1 of this recommendation.
The Joint
Customers state that with respect to compliance with Section 366.03, F.S., the
primary concern seems to be whether DEF can be allowed any leeway under the
LLCP “Special Terms” to negotiate “non-material” terms of the LLCA contract. (Joint
Customers BR 11) They further state that as long as the category of
non-material term is adequately defined, DEF’s flexibility should not be a
barrier to approval of the DEF proposal. (Joint Customers BR 11) Lastly, the Joint
Customers state that the Commission should find that DEF’s petition and
associated tariffs are consistent with Section 366.043, F.S. (Joint Customers
BR 11)
Conclusion
The
Commission’s vote on the LLCA should be consistent with the Commission’s vote
on the LLCP in Issue 1. The LLCA and LLCP tariffs are together structured to
include terms and conditions applicable to large load customers and any LLCP
customers would need to execute an LLCA. If the Commission denies the proposed
LLCP with leave to refile in Issue 1, the Company should make the corresponding
changes to the LLCA.
Issue 3:
Should
the Commission approve, deny, or deny with leave to refile with modifications
the proposed CIAC tariff modifications (Tariff Sheet No. 4.030 and 4.132,
paragraph 13.07)? If denied with leave to refile, what should the modifications
be?
Recommendation:
If
the Commission approves the proposed LLCP and LLCA tariffs as filed, the CIAC
tariff modifications should be approved. If the Commission denies the proposed
LLCP and LLCA tariffs, this issue is moot. Staff’s recommendation to deny the LLCP tariff
with leave to refile does not impact the CIAC issue. (Nguyen)
Position
of the Parties
DEF:
The
Commission should approve, without modifications, DEF’s proposed modifications
to the CIAC tariff. Customer-funded, refundable Contributions in Aid of
Construction ("CIACs") appropriately assign the cost of
customer-specific interconnection facilities while recognizing that those
facilities may subsequently provide value to other customers.
OPC:
The
Commission should deny the proposed CIAC modifications. If the CIAC tariff
provisions are denied with leave to refile, the Commission should require DEF
to include modifications to make large load customers pay 100% of the “but for”
connection costs related to large load customers that include the incremental
generation and transmission upgrades costs, including the costs of network
transmission upgrades.
FL
Rising:
The
CIAC provisions should be made more robust, so as to comply with section 366.043,
Florida Statutes, and protect ratepayers.
Joint
Customers:
The
Commission should approve the as-filed proposed CIAC tariff modifications. If
the Commission adopts modifications to the DEF proposal, it should specify that
existing customers will remain subject to the currently approved CIAC
provisions of the existing General Rules and Regulations Governing Electric
Service (Tariff Sheet No. 4.030, part 3.01).
Staff
Analysis:
Section
13.07 in proposed Tariff Sheet No. 4.132 defines the terms of CIAC. (EXH 2, MPN
C1-22) Pursuant to the proposed CIAC provision, the customer would be required
to pay 100 percent of the total estimated costs to extend service in advance.
The payments would be refunded over a period of up to five years, less CIAC
that would normally be paid by the customer. Any customer funds not refunded by
the end of the 5-year period because of an insufficient load become
nonrefundable and would be retained by DEF. (TR 51) DEF witness Chatelain
testified that these changes are designed to protect the general body of
customers from incurring costs to serve new load if that load does not
materialize. (TR 50) Witness Chatelain also asserted that there is no
flexibility in the CIAC provision, and all customers must pay CIAC up front,
subject to refund over five years. (TR 59)
The proposed
CIAC provision differs from Rule 25-6.064, F.A.C., (CIAC Rule). The CIAC
calculation pursuant to the rule estimates expected base rate revenues over a
4-year period and subtracts the revenues from the cost for the facilities. The
CIAC rule does therefore not include refunds. (TR 113)
DEF stated
that the proposed CIAC provision includes advance payment of all estimated
costs to extend service for customer-specific distribution and/or transmission
facilities, dedicated substation facilities (including transformers, breakers,
protection, and control equipment), interconnection facilities, engineering,
design, and construction support, site-specific costs for non-standard or
extraordinary facilities, and cost of removal and/or upgrade of existing
facilities (as applicable). (EXH 16, MPN E2)
DEF stated
that the utility could request additional payment for any additional facilities
installed, particularly if it is included as part of upfront site-specific
costs. (EXH 17, MPN E10) During cross examination, DEF witness Chatelain testified
that the proposed CIAC tariff would not include incremental generation and some
transmission costs that are not site-specific. (TR 103) Witness Chatelain
clarified that the minimum bill calculation, which would be effective if a
customer terminates after reaching their full load ramp, would include
incremental generation and transmission costs in the applicable rate schedule
at the time. (TR 104)
OPC witness
Nelson testified that the proposed CIAC policy includes “an extremely limited
amount of connection costs, especially when applied to large load customers.”
(TR 300) Witness Nelson further asserted that the CIAC would not cover all
upgrades needed for the new customer’s interconnection or any of the system
upgrade costs, resulting in those costs being socialized among all customers
which would be in direct violation of SB 484. (TR 300) In its brief, OPC argued
the CIAC policy leaves the costs of incremental transmission and generation
uncovered. (OPC BR 6)
FL Rising
took a similar position as OPC. (FL Rising BR 12) Witness Rábago testified that
DEF’s proposal would refund the CIAC costs to the large load customer, but by
refunding those costs, the general body of ratepayers is paying for those costs
incurred solely by the large load customer, despite the new law providing that
those costs must fall on the large load customer to recover. (TR 368)
Witness
Wishart rebutted the arguments made by OPC and FL Rising, testifying that the
refund of qualifying CIAC payments has been an established component of DEF’s
line extension policy and is reflected in DEF’s existing revenue requirement
and base rates. (TR 197) Stated differently, the cost included in the refund of
qualifying CIAC payments is already embedded in the GSD-1 and GSDT-1 rates
which a large load customer would pay. (TR 197) Staff
believes that the requirement to pay 100 percent of the cost upfront is
designed to protect the general body of ratepayers if the revenues from the
large load customer do not materialize as projected.
The CIAC Rule
is applicable to customers who request new facilities or upgraded facilities in
order to receive electric service. Under the CIAC rule and DEF’s existing CIAC
policy, the general body of ratepayers would bear the risk if an applicant's
projected electric load and estimated revenue—used to calculate their CIAC
obligation—fails to fully materialize over the standard four-year calculation
period. To protect the general body of customers from carrying this financial
risk to extend service, staff believes that DEF’s proposal to request the total
estimated cost to extend facilities up-front shifts the risk directly to the
applicant/cost-causer should revenues not materialize as projected as the large
load customer controls whether their projected load materializes. Therefore,
DEF’s proposed CIAC provision adds an additional layer of protection to the
general body of ratepayers.
Staff
believes if facilities only serve and benefit the new load, they should be
funded through a CIAC payment. However, if upgrades are to be used to serve and
benefit other customers, they should be rolled into rate base for recovery
through base rates charged to all customers, including any large load customers.
Conclusion
If
the Commission approves the proposed LLCP and LLCA tariffs as filed, the CIAC
tariff modifications should be approved. If the Commission denies the proposed
LLCP and LLCA tariffs, this issue is moot. Staff’s recommendation in Issue 1 to deny the
LLCP tariff with leave to refile does not impact the CIAC issue.
Issue 4:
What
are the effective dates for the proposed Large Load Customer Policy, Large Load
Customer Agreement, and CIAC tariff?
Recommendation:
If the
Commission approves the proposed Large Load Customer Policy, Large Load
Customer Agreement, and CIAC tariffs as filed, they should be effective on the
date of the Commission vote. If the
Commission denies the proposed tariffs, this issue is moot. If the Commission
denies the proposed tariffs with leave to refile, DEF should have the option to
refile tariffs that comply with the Commission vote for review and
administrative approval by staff within 10 business days of the issuance of the
order. The tariffs should be filed with the Clerk’s Office in the docket. Staff
should be given administrative authority to review any refiled tariffs to
confirm that they are consistent with the Commission’s decision. The refiled
tariffs should become effective on the date staff administratively approves
them. (Nguyen)
Position
of the Parties
DEF:
The
LLCP, LLCA, and CIAC tariffs should be effective immediately upon Commission
approval in this docket.
OPC:
There
should be no effective dates as DEF’s Petition should be denied. If DEF’s
proposals are approved, the effective date(s) should be in compliance with the
provisions of SB 484.
FL
Rising:
Effective
date should not be decided until there are proposals that comply with the statutory
mandates.
Joint
Customers:
Not
Provided.
Staff
Analysis/Conclusion:
If
the Commission approves the proposed Large Load Customer Policy, Large Load
Customer Agreement, and CIAC tariffs as filed, they should be effective on the
date of the Commission vote. If the
Commission denies the proposed tariffs, this issue is moot. If the Commission
denies the proposed tariffs with leave to refile, DEF should have the option to
refile tariffs that comply with the Commission vote for review and
administrative approval by staff within 10 business days of the issuance of the
order. The tariffs should be filed with the Clerk’s Office in the docket. Staff
should be given administrative authority to review any refiled tariffs to confirm
that they are consistent with the Commission’s decision. The refiled tariffs
should become effective on the date staff administratively approves them.
Issue 5:
Should this docket be closed?
Recommendation:
If staff’s recommendation to deny certain portions
of DEF’s tariffs with leave to refile is granted, the docket should remain open
to allow time for any refiled tariffs to be received, reviewed, and approved by
staff. In that event, the docket should be closed administratively. If DEF’s
tariffs are granted or denied in their entirety, the docket should be closed
upon the expiration of the time for filing an appeal. (Thompson, Crawford)
Position of the Parties
DEF:
Not Provided.
OPC:
No.
FL Rising:
No. The Commission should deny Duke’s proposal and
then direct Duke to re-file with a proposal that complies with section 366.043,
Florida Statutes.
Joint Customers:
Not Provided.
Staff Analysis:
If staff’s recommendation to deny certain portions
of DEF’s tariffs with leave to refile is granted, the docket should remain open
to allow time for any refiled tariffs to be received, reviewed, and approved by
staff. In that event, the docket should be closed administratively. If DEF’s
tariffs are granted or denied in their entirety, the docket should be closed
upon the expiration of the time for filing an appeal.
