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Fla. bill would create storm recovery clause to encourage grid investment


According to Market Intelligence, December 2022


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Fla. bill would create storm recovery clause to encourage grid investment

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Linemen work to restore a distribution pole affected by a fallen tree in Coral Gables, Fla., in 2017.

Source: Florida Power & Light Co.

Florida Sen. Joe Gruters, a Republican, has introduced Senate Bill 796, which would require investor-owned utilities to submit storm protection plans for hardening grid infrastructure and managing vegetation to the state's Public Service Commission. In turn, the utilities would be able to recover capital expenditures related to their hardening work through a recovery clause, rather than base rates.

Gruters is confident that his proposal to require utilities to file long-term plans for protecting transmission and distribution lines from major hurricanes will pass in 2019's legislative session, the lawmaker said.

Florida's utilities currently incur and recover from ratepayers the costs of repairing infrastructure after a major storm and, since the 2004-2005 hurricane season, of hardening the grid prior to storms.

Under the legislation, the PSC would have to approve an initial plan covering the subsequent 10 years within six months of each utilities' filing. The commission would also conduct an annual proceeding to allow the utility to recover storm protection costs. Utilities would have to submit an updated report at least every three years to the PSC.

"This will allow the companies of Florida to be able to plan and be able to tackle these projects in a systematic way to create maximum efficiency throughout the state," Gruters said in a March 21 interview with S&P Global Market Intelligence.

Costs recoverable through the storm protection recovery clause would not overlap with costs recoverable through a utility's base rates. If a capex cost is recoverable through the storm protection clause, the utility can recover annual depreciation on the cost, and a return on the depreciated balance of the costs related to the return on equity approved by the PSC in the most recent rate case or settlement.

Gruters hopes the bill will push utilities to harden the entire state's grid infrastructure above and below ground, starting with communities most at risk of power outages in major storms. Preventive measures would reduce power outages and help both utilities and ratepayers save money over the long term.

"We've been hit so hard in the past couple of years and we're going to continue to get hit," Gruters said. "I think people are committed to doing the right thing for Florida and making sure that we become a leader in the nation when it comes to resiliency and reliability for power grids."

Since SB 796 was filed on Feb. 6, the bill was unanimously approved by the Innovation, Industry and Technology Committee and the Infrastructure and Security Committee. Its next stop is the Appropriations Committee before the full Senate. "I fully anticipate this bill passing this cycle," before the legislative session ends May 8, he added. If passed, the bill would take effect July 1.

Strong storms, such as hurricanes Matthew, Irma and Michael, have pounded the Sunshine State in recent years, testing utilities' restoration efforts and storm reserves and hitting customers' monthly bills. In February, Gulf Power Co. asked the Florida PSC to charge an additional $8 a month to its 136,000 customers to recover $342 million of costs from Hurricane Michael and replenish its storm reserve. Florida Power & Light Co. was able to forego seeking $1.3 billion from customers for Hurricane Irma restoration costs thanks to the federal tax overhaul that passed at the end of 2017.

Gruters said under his bill, he hopes customers will not have to pay more, but at most monthly bills would go up by $1 when the utilities complete their storm hardening projects and present their case for recovering costs to the commission.

"All you have to do is look at Gulf Power and their $8/month ratepayer increase request in the PSC and you could see we're better off doing this now and taking the necessary steps," he added.

Duke Energy Florida LLC, FPL, Florida Public Utilities Co., Gulf Power and Tampa Electric Co. – which would have to comply with the bill if signed into law – are keeping an eye on SB 796 as it makes it way through the legislative process. So far, none of the investor-owned utilities in the state have spoken out against the bill. Representatives for Duke Energy Florida, a Duke Energy Corp. company, and Florida Public Utilities Company, a Chesapeake Utilities Corp. subsidiary, separately said the companies are monitoring the bills.

Spokespeople for FPL, a NextEra Energy Inc. subsidiary and Gulf Power corporate affiliate, and Tampa Electric, an Emera Inc. subsidiary, said the utilities support the bill since it would help with long-term planning for storm hardening to make the grid more resilient.

"This bill is essential to the future of Florida's economy," FPL spokesperson Chris McGrath said in a March 25 email.