State questions $55M of FPL’s $318M Matthew recovery cost ‘allowance’ (watchdog.org)

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State questions $55M of FPL’s $318M Matthew recovery cost ‘allowance’
By John Haughey | Watchdog.org May 9, 2018 (0)

The Florida Public Service Commission (PSC) has scheduled two days of hearings in Tallahassee beginning May 22 to review its 2017 approval of Florida Power & Light’s (FPL) petition to recover $318.5 million in “incremental storm restoration costs” related to Hurricane Matthew in 2016.

In February 2017, the PSC granted FPL’s request and allowed the state’s largest utility to assess its 5 million rate-payers an additional $3.36 per 1,000 kilowatt-hours of electricity used. The 12-month surcharge expired in March 2018.

As part of that approval, however, the PSC asked the state’s Office of Public Counsel (OPC) to verify FPL’s documentation to determine if the $318.5 recovery allowance was too little or too much.


According to an analysis on behalf of OPC by Helmuth W. Schultz, a Michigan-based senior regulatory analyst, as much as $55 million claimed by FPL should be “disallowed” because of questionable documentation.

Schultz’s recommended the $18 million FPL claimed for hotel lodging to house responders and contractors be disallowed because of “insufficient supporting detail” to justify that costs were “prudently incurred and reasonable.”

He also recommended removing $24.026 million from FPL’s recovery allowance seeking to replenish its storm reserve from $93 million to $117 million because FPL “failed to meet its burden of proof regarding these costs.”

In addition, Schultz questioned how FPL “tracked” contractor costs, recommending reductions be considered for contractor mobilization and demobilization time and costs because “there is a lack of documentation and justification for those specific activities.”

Schultz did not specifically stipulate how much that reduction should be, but during a May 7 pre-hearing, the OPC recommended a 10-percent decrease.


FPL Senior Counsel Ken Rubin said a 10-percent reduction would “add $13.704 million to disallowed costs” and objected to the proposal because it is “an entirely new position that does not conform with pre-filed testimony.”

“For the very first time the Public Counsel says ‘disallow 10 percent,’ introducing this without any pre-filed testimony,” he said. “Where it comes from, we have no idea.”

Rubin requested the proposed 10-percent reduction not be introduced during the May 22 hearing.

OPC attorney Patty Christensen said Schultz recommended a reduction “be considered” and a 10-percent reduction is what OPC wants to consider.

“It is inappropriate to strike a position because it is a position,” Christensen said. “If the company has a different position, they can bring it up and we can have that discussion in the hearing.”


FPL Senior Attorney Kevin I.C. Donaldson said the scrutiny applied to mobilization costs represents a new venue of verification that should be clarified in rule-making workshops before being imposed.

“You are imposing this solely on FPL with no testimony specifically on how you are going to do this,” Donaldson said. “This is something you do generically, not in a cost-recovery prudence review. It is clearly inappropriate for it to be included as an issue.”

Attorneys for the Florida Retail Federation (FRF) and the Florida Industrial Power Users Group (FIPUG) maintained mobilization should be reviewed and the proposed 10-percent reduction is appropriate.

This is “something to be ferreted out during the hearing,” said FIPUG’s Jon C. Moyle, Jr., noting verifying mobilization costs should be “fairly put in play. It is appropriate to have an issue like this considered.”

Hurricane Mathew was a Category 4 hurricane in the Caribbean in early October 2016. In anticipation of a Florida landfall, FPL mobilized 14,600 FPL employees, contractors and mutual aid responders to restore services after the storm. Matthew side-swiped Florida before making landfall in the Carolinas, knocking out power to 1.2 million FPL customers.


In rebutting Schultz’s findings, FPL said it paid $21.790 million in lodging costs — not $18 million — for 127,087 “room-nights” to house contractors and others mustered to respond to the storm.

The utility clams it provided invoices reflecting the initial prepayments made to its hotel vendor and added subsequent invoices that reflected additional payments for the final total billing.

FPL maintains it needs the $24 million to replenish its storm reserve to comply with a 2012 agreement with the PSC that it maintain $117 million in the account.

FPL objected to Schultz’s criticism of its record-keeping, maintaining it is unable to provide the “total costs associated with mobilization/demobilization” because those expenditures are not always specifically itemized on contractors’ invoices.

FPL incurred approximately $1.3 billion in recovery costs associated with Hurricane Irma in September 2017. It announced in January that it would not increase rates to pay for the restoration effort and, instead, use federal tax savings to avoid a surcharge that would have cost its customers an average of approximately $250 each.