19-006137RP Office Of Public Counsel vs. Florida Public Service Commission Status: Closed DOAH Final Order on Tuesday, January 21, 2020.

Summary: Petitioner and Intervenor had standing to challenge the proposed rules, but the evidence showed that the proposed rules are not invalid exercises of delegated legislative authority.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

OFFICE OF PUBLIC COUNSEL,

Petitioner,

and

FLORIDA INDUSTRIAL POWER USERS

GROUP,

Intervenor,

vs. Case No. 19 - 6137RP

FLORIDA PUBLIC SERVICE

COMMISSION,

Respondent,

and

FLORIDA POWER & LIGHT COMPANY;

GULF POWER COMPANY; TAMPA

ELECTRIC COMPANY; AND DUKE

ENERGY FLORIDA, LLC,

Intervenors.

__________________________ _____ /

FINAL ORDER

An administrative hearing was conducted in this case on

December 20, 2019 , in Tallahassee , Florida, before James H.

Peterson, III, Administrative Law Judge with the Division of

Administrative Hearings.

APPEARANCES

For Office of Public Counsel:

James Ray Kelly, Public Counsel

Charles Rehwinkel, Dep uty Public Counsel

A. Mireille Fall - Fry , Esquire

Thomas A. David, Esquire

Office of Public Counsel

111 West Madison Street , Room 812

Tallahassee, Florida 32399

For Florida Industrial Power Users Group :

Jon C. Moyle, Jr., Esquire

Karen A. Putnal, Esquire

Moyle Law Firm, P.A.

118 North Gadsden Street

Tallahassee, Florida 32301

For Florida Public Service Commission:

S amantha Cibula, Esquire

Andrew King, Esquire

Adria Harper, Esquire

Keith Hetrick, General Counsel

Florida Public Service Commission

2450 Shumard Oak Boulevard

Tallahassee, Florida 32399 - 0850

For Florida Power & Light Company and Gulf Power Company :

Jason B. Gonzalez, Esquire

Daniel Elden Nordby, Esquire

Amber Stoner Nunnally , Esquire

Shutts & Bowen LLP

215 South Monroe Street , Suite 804

Tallahassee, Florida 32301

and

Kenneth M. Rubin, Esquire

Florida Power & Light Company

700 Universe Boulevard

Juno Beach, Florida 33408

and

Russell A. Badders, Esquire

Beggs & Lane

Post Office Box 12950

Pensacola, Florida 32591

( for Gulf Power Company)

For Tampa Electric Company:

Malcolm N. Means, Esquire

James D. Beasley, Esquire

Ausley & McMullen

Post Office Box 391

Tallahassee, Florida 32302

For Duke Energy Florida, LLC:

Matthew Bernier, Esquire

Duke Energy Florida, LLC

106 East College Avenue , Suite 800

Tallahassee, Florida 32301

STATEMENT OF ISSUE S

I. Whether the Office of Public Counsel ( Petitioner or the

Public Counsel ) and Florida Industrial Power Users Group

(Florida Industrial ) have standing .

II . Whether proposed rules 25 - 6.030(3)(d), 25 - 6.030(3)(e),

25 - 6.030(3)(j), 25 - 6.031(6), and 25 - 6.031(7)(c), proposed by the

Florida Public Service Commission (Respondent or the

Commission ), are valid exercises of delegated legislative

authority.

PRELIMINARY STATEMENT

On November 15, 2019, the Public Counsel filed a petition

with the Division of Administrative Hearings (DOAH) to determine

the invalidity of certain subsections of proposed r ules 25 - 6.030

and 25 - 6.031 . The case was assigned DOAH Case No. 19 - 6137RP.

Investor - owned utilities (IOUs) Florida Power & Light (Florida

Power ), Gulf Power Company (Gulf Power), Duke Energy Florida

(Duke Energy ), and Tampa Electric Company (Tampa Elect ric ) each

filed unopposed motions to intervene, which were granted.

At a telephonic case status hearing on November 22, 2019,

the final hearing was scheduled to be held December 20, 2019 ,

within the 30 - day statutory time - frame . Following that status

hearing, a n Order of Pre - Hearing Instructions was entered

requiring accelerated discovery and submission of a joint pre -

hearing stipulation by the parties .

On November 27, 2019, Florida Industrial filed a Motion to

Intervene in alignment with Petitioner . Following the

Commission ’s Response in Opposition , Florida Industrial’s Motion

to Intervene was granted , subject to proof of standing at the

final hearing.

The parties timely filed their Joint Pre - Hearing

S tipulation on December 18, 2019, whi ch set forth a number of

agreed facts and conclusions of law which have been utilized in

the preparation of this Final Order.

Prior to the final hearing, Florida Power filed a Motion to

Dismiss Florida Industrial’ s p etition for lack of standing , and

a Mot ion in Limine to limit the scope of the testimony of the

Public Counsel’s expert witness, Marshall Willis, to those

issues addressed during the November 5, 2019, public hearing

before the Commission and during his December 16 , 2019,

deposition in this case . The Motion in Limine further requested

that Mr. Willis not be permitted to testify as an expert on

topics beyond his area of expertis e in accounting. Those

motions were addressed at the onset of the final hearing. A

ruling on the Motion to Dismiss Florida Industrial was reserved

until after the submission of proposed final orders in this

case. The Motion in Limine was resolved by agreement that the

testimony and expertise of Mr. Willis be limited as requested in

that motion.

T he final hearing was conducte d on December 20, 2019 . B oth

the Public Counsel and Florida Industrial were allowed to fully

participate in the proceedings and ruling s on any obj ections to

their standing were reserved until after the hearing. The

parties introduced 53 joint e xhibits which were received into

evidence as Exhibits Jt - 1 through Jt - 53 . Petitioner called two

witnesses: Marshall Willis, the Public Counsel’s chief

legislative analyst who is an expert in regulatory accounting

and ratemaking; and Tom Ballinger, director of e ngineering at

the Commission . Petitioner introduced 24 exhibits received into

evidence as Exhibits P - 1 through P - 24 .

Florida Industrial called as a witness William Coston,

s upervisor of the Division of Economics for the Commission , and

offered seven exhibits receive d into evidence a s Florida

Industrial Exhibits 1A through 1D, and 2 throug h 4 .

The Commission called three of its employee s as witnesses:

Robert Graves, James Breman, and Bart Fletcher, and offered

seven exhibits received into evidence as Exhibits R - 1 through

R - 7 . Florida Power call ed one witness, David Bromley, manager

of regulatory services for p ow er d elivery at Florida Power.

The proceedings were recorded and a transcript was ordered.

The two - volume Transcript of the final hearing was filed on

December 26, 2019. The parties were allowed until January 3,

2020 , to file proposed final o rders . All of the parties timely

filed their respective Proposed Final Orders, each of which have

been considered in the preparation of this Final Order.

FINDINGS OF FACT

Background

1. Petitioner is statutori ly authorized to represent the

c itizens of the State of Florida in matters before the

Commission , and to appear before other state agencies in

connection with matters under the jurisdiction of the

Commission . § 350.0611(1), (3), and (5), Fla. Stat. 1/

2. Respondent is the state agency with the authority to

impl ement and enforce , including inter alia , by adopting the

administrative rules at issue here, pursuant to c hapter 366,

Florida Statutes, the law governing the regulation of public

utilities, as defined in s ec tion 366.02(1) .

3. As a state agency commission, the Commission is subject

to Florida’s Government in the Sunshine Law, section 286.011,

Florida Statutes. Under section 286.011, all official acts of

the Commission must be taken at public meetings , open to the

public at all times.

4. The intervening IOUs are public utilities that would be

substantially affected by the proposed r ules. As public

utilities, the intervening IOUs are subject to the Commission ’s

jurisdiction und er chapter 366 . Section 366.96 directs the

Commission to adopt rules providing for the strengthening of

electric utility infrastructure, including a storm protection

plan rule , and rules governing storm protection plan cost

recovery . T he proposed rules challenged in this proceeding

address those issues and require public utilities to file

tr ansmission and distribution storm protection plans that cover

the immediate 10 - year planning period . As entities that will be

affected by the adoption of the proposed rules, the intervening

IOU s have a n interest in this proceeding and the adoption of

rules addressing the strengthening of electric utility

infrastructure, storm protection plan s, and storm protection

plan cost recovery . The i ntervening IOUs support the validity

of the p roposed r ules challenged in this proceeding and oppose

the relief sought by the Public Counsel and Florida Industrial .

5. The 2019 Florida Legislature passed SB 796 to enact

section 366.96, entitled “Storm protection plan cost recovery.”

Section 366.96 provides:

366.96 Storm protection plan cost recovery .

(1) The Legislature finds that:

(a) During extreme weather conditions, high

winds can cause vegetation and debris to

blow into and damage electrical transmission

and distribution facilities, resulting in

power outages.

(b) A majority of the power outages that

occur during extreme weather conditions in

the state are caused by vegetation blown by

the wind.

(c) It is in the state’s interest to

strengthen electric utility infrastructure

to withs tand extreme weather conditions by

promoting the overhead hardening of

electrical transmission and distribution

facilities, the undergrounding of certain

electrical distribution lines, and

vegetation management.

(d) Protecting and strengthening

transmissi on and distribution electric

utility infrastructure from extreme weather

conditions can effectively reduce

restoration costs and outage times to

customers and improve overall service

reliability for customers.

(e) It is in the state’s interest for each

ut ility to mitigate restoration costs and

outage times to utility customers when

developing transmission and distribution

storm protection plans.

(f) All customers benefit from the reduced

costs of storm restoration.

(2) As used in this section, the term:

(a) “Public utility” or “utility” has the

same meaning as set forth in s. 366.02(1),

except that it does not include a gas

utility.

(b) “Transmission and distribution storm

protection plan” or “plan” means a plan for

th e overhead hardening and increased

resilience of electric transmission and

distribution facilities, undergrounding of

electric distribution facilities, and

vegetation management.

(c) “Transmission and distribution storm

protection plan costs” means the re asonable

and prudent costs to implement an approved

transmission and distribution storm

protection plan.

(d) “Vegetation management” means the

actions a public utility takes to prevent or

curtail vegetation from interfering with

public utility infrastruct ure. The term

includes, but is not limited to, the mowing

of vegetation, application of herbicides,

tree trimming, and removal of trees or brush

near and around electric transmission and

distribution facilities.

(3) Each public utility shall file,

pursua nt to commission rule, a transmission

and distribution storm protection plan that

covers the immediate 10 - year planning

period. Each plan must explain the

systematic approach the utility will follow

to achieve the objectives of reducing

restoration costs and outage times

associated with extreme weather events and

enhancing reliability. The commission shall

adopt rules to specify the elements that

must be included in a utility’s filing for

review of transmission and distribution

storm protection plans.

(4) In its review of each transmission and

distribution storm protection plan filed

pursuant to this section, the commission

shall consider:

(a) The extent to which the plan is

expected to reduce restoration costs and

outage times associated with extreme we ather

events and enhance reliability, including

whether the plan prioritizes areas of lower

reliability performance.

(b) The extent to which storm protection of

transmission and distribution infrastructure

is feasible, reasonable, or practical in

certain areas of the utility’s service

territory, including, but not limited to,

flood zones and rural areas.

(c) The estimated costs and benefits to the

utility and its customers of making the

improvements proposed in the plan.

(d) The estimated annual rate impact

resulting from implementation of the plan

during the first 3 years addressed in the

plan.

(5) No later than 180 days after a utility

files a transmission and distribution storm

protection plan that contains all the

elements required by commission r ule, the

commission shall determine whether it is in

the public interest to approve, approve with

modification, or deny the plan.

(6) At least every 3 years after approval

of a utility’s transmission and distribution

storm protection plan, the utility mus t file

for commission review an updated

transmission and distribution storm

protection plan that addresses each element

specified by commission rule. The

commission shall approve, modify, or deny

each updated plan pursuant to the criteria

used to review t he initial plan.

(7) After a utility’s transmission and

distribution storm protection plan has been

approved, proceeding with actions to

implement the plan shall not constitute or

be evidence of imprudence. The commission

shall conduct an annual proceedi ng to

determine the utility’s prudently incurred

transmission and distribution storm

protection plan costs and allow the utility

to recover such costs through a charge

separate and apart from its base rates, to

be referred to as the storm protection plan

c ost recovery clause. If the commission

determines that costs were prudently

incurred, those costs will not be subject to

disallowance or further prudence review

except for fraud, perjury, or intentional

withholding of key information by the public

utility .

(8) The annual transmission and

distribution storm protection plan costs may

not include costs recovered through the

public utility’s base rates and must be

allocated to customer classes pursuant to

the rate design most recently approved by

the commissi on.

(9) If a capital expenditure is recoverable

as a transmission and distribution storm

protection plan cost, the public utility may

recover the annual depreciation on the cost,

calculated at the public utility’s current

approved depreciation rates, and a return on

the undepreciated balance of the costs

calculated at the public utility’s weighted

average cost of capital using the last

approved return on equity.

(10) Beginning December 1 of the year after

the first full year of implementation of a

transmi ssion and distribution storm

protection plan and annually thereafter, the

commission shall submit to the Governor, the

President of the Senate, and the Speaker of

the House of Representatives a report on the

status of utilities’ storm protection

activities . The report shall include, but

is not limited to, identification of all

storm protection activities completed or

planned for completion, the actual costs and

rate impacts associated with completed

activities as compared to the estimated

costs and rate im pacts for those activities,

and the estimated costs and rate impacts

associated with activities planned for

completion.

(11) The commission shall adopt rules to

implement and administer this section and

shall propose a rule for adoption as soon as

practicable after the effective date of the

act, but not later than October 31, 2019.

6 . S ection 366.96 , in essence, does three things. First,

it requires each public utility to file a transmission and

distribution storm protection plan (storm protectio n plan) and

update the plan at least every three years. Second, section

366.96(7) directs the Commission to hold an annual proceeding,

which the law establishes as the “storm protection plan cost

recovery clause,” to determine each public utility’s pruden tly

incurred costs to implement its plan and allow the utility to

recover such costs through a charge separate and apa rt from its

base rate . Third, section 366.96(3) and (11), respectively,

direct the Commission to adopt rules that specify the elements

to be included in an IOU’s storm protection plan for the

Commission’s review, and rules to implement and administer the

section as soon as practicable after the effective date , but not

later than October 31, 2019.

Rule development and related proceedings

7. In reaction to section 366.96, t he Commission proposed

two rules: (1) a storm protection plan rule, proposed r ule

25 - 6.030; and (2) a storm protection p lan cost recovery clause

rule, proposed r ule 25 - 6.031.

8. The Commission’s Notice of Development of Rulemaking

for those proposed rules was published in Volume 45, No. 111, of

the Florida Administrative Register (F.A.R.) on June 7, 2019.

The notice included two new rules: Rule 25 - 6.030, Storm

Protection Plan, and Rule 25 - 6.031, Storm Pro tection Plan Cost

Recovery Clause. The notice also scheduled a rule development

workshop on June 25, 2019. Pursuant to F. A.R. notice published

on August 6, 2019, Volume 45, No. 152, a second rule development

workshop was held on August 20, 2019. Represe ntatives for the

Public Counsel , Florida Power , Gulf Power , Tampa Electric , Duke

Energy , and Florida Industrial , among other s , participated at

the workshops and submitted written post - workshop comments.

9. In accordance with se ction 286.011, the Commission held

a public meeting, which the Commission calls an “agenda

conference,” on October 3, 2019, at which it determined whether

to propose the adoption of proposed r ules 25 - 6.030 and 25 - 6.031.

To aid the Commission in rendering its decision a t the agenda

conference, on September 20, 2019, the Commission’s staff

prepared and filed, in accordance with its usual practice and

procedure , in the Commission’s public docketing system, a

written memorandum directed to the Commission. This memorandum

i s commonly referred to at the Commission as the “Staff

Recommendation.” The Staff Recommendation contained a written

analysis on whether the Commission should propose the adoption

of the rules, and it also included stakeholder comments obtained

through th e rulemaking process and the Commission staff’s

analysis and recommendations to the Commission on possible rule

language.

10. Representatives for the Public Counsel and Intervenors

Florida Power , Gulf Power, Tampa Electric, Duke Energy , and

Florida Indust rial were heard at the October 3, 2019 , Agenda

Conference on the issue of whether the Commission should propose

the adoption of the new rules. After hearing comment and

argument from stakeholders and Commission staff, the Commission

proposed r ules 25 - 6.030 and 25 - 6.031.

11. In accordan ce with the Commission’s vote, proposed

r ules 25 - 6.030 and 25 - 6.031 were published in the October 7,

2019 , edition of the F.A.R., Volume 45, Number 195. The notice

identifies section 366.96 as the “Rulemaking Authori ty” and “Law

Implemented” for both proposed r ules. The notice also stated

that a Statement of Estimated Regulatory Costs (SERC) was

prepared by the Commission and included a summary of the SERC,

in which the Commission stated, among other things, t hat it had

determined that the proposed r ules would not have an adverse impact on small business. The notice further stated that “[a]ny person who wishes to provide information regarding a statement

of estimated regulatory costs or provide a proposal for a lower

cost regulatory alternative must do so in writing within 21 days of this notice.”

12. Pursuant to section 120.54(3)(a)4., Florida Statutes,

the Commission filed a letter on October 7, 2019, with the Joint

Administrative Procedures Committee that included a copy of the

proposed rules; a detailed written statement of the facts and

circumstances justifying the proposed rules; a copy of the SERC

it prepared pursuant to sections 120.54(3)(b)1. and 120.541; a

statement of the extent to which the proposed rules relate to

federal standards or rules on the same subject; and a copy of

the F.A.R. Notice of Proposed Rule published on October 7, 2019.

Pursuant to section 120.54(3)(a)3., the Commission issued a

notice (Commission Order No. PSC - 2019 - 0403 - NOR - EU) on Octob er 7,

2019, that included a copy of the F.A.R. notice, to all persons

named in the proposed rules and those persons who requested

advance notice of its proceedings.

13. On October 25, 2019, pursuant to section 120.54(3)(c),

the Public Counsel timely fil ed a Petition for a Hearing on

proposed r ules 25 - 6.030 and 25 - 6.031. A public hearing was

scheduled before the full Commission on November 5, 2019,

pursuant to notice appearing in the October 29, 2019 , edition of

the F.A.R., Volume 45, Number 211.

14. The Public Counsel filed a motion for continuance on

October 29, 2019, which was denied by Commission Order No.

PSC - 2019 - 0468 - PCO - EU, issued October 31, 2019. On October 31,

2019, the Public Counsel filed a motion to suspend the

November 5, 2019 , hearing and initiate formal proceedings, which

was denied by Commission Order No. PSC - 2019 - 0469 - PCO - EU.

15. The public hearing was held on November 5, 2019.

Through coun sel and one witness, the Public Counsel and Florida

Industrial provided evidence and argument in opposition to the

proposed r ules. The Public Counsel also read the comments of

Kelly Cisarik into the record. Through counsel, Intervenors

Florida Power , Gulf Power , Tampa Electric, and Duke Power

provided evidence and argument in support of the proposed r ules.

The Public Counsel , by oral motion at the beginning and end of

the public hearing, requested the Commission to reconsider its

decision to deny its motion to suspend the hearing and initiate

formal proceedings, which the Commission denie d. After hearing

evidence and argument on all issues under consideration, the

Commissi on voted to make no changes to proposed r ules 25 - 6.030

and 25 - 6.031.

16. The Public Counsel timely filed its Petition to

Determine the Invalidity of Proposed Florida Administrative Code

Rules 25 - 6.030 and 25 - 6.031 (Petition) with DOAH on November 15,

2019. Subsequently, Florida Industrial was permitted to

intervene, subject to proof of standing.

The interests of the Public Counsel and Florida Industrial

17. The citizens of the State of Florida that the Public

Counsel is statutorily authorized to represent include all

Florida customers of the IOUs regulated by the Commission . The

ci tizens include ratepayers of the intervening IOUs who are

responsible to pay t he rates charged by the IOUs through both

the increased regulatory costs for compliance with the proposed

r ules, which are included in base rates, and any charges

approved through storm protection plan cost recovery clause

proceedings , separ ate and apart f rom base rates. See, e.g.,

Transcript, Vol. 1 at 75 (Ballinger) “[Customers] are impacted by the rate s . . . .” ) . Therefore, the c itizens represented by

the Public Counsel will be substantially affected by and have a

substantial interest in the proposed r ules.

18. Both the Public Counsel and Florida Industrial

actively participated in the rule development process for the

rules at issue in this proceeding.

19. Florida Industrial i s an association of large

industrial and commercial businesses who receive electricity

from the state’s IOUs and whose substantial interests are

affected by the Commission's regulation of utility rates.

Florida Industrial h as participated as an intervenor in numerous

proceedings before the Commission involving base r ate and cost

recovery clause proceedings.

20. Florida Industrial has entered into settlement

agreements with IOUs in Commission proceedings, including

matters involving Florida Power, and in related matters before

the Florida Supreme Court.

21. Florida Industrial's Verified Answers to Public

Service Commission's First Interrogatories were received into

evidence , which, although hearsay, supplement the direct

evidence of , with respect to the nature of the business entities

that Florida Industrial represents, e.g., air separation,

fertilizer production, forest products, chemical, phosphate

mining, metal recycling, and a gricultural/food processing and

distribution companies. A significant number of Florida

Industrial's members receive electric power from one or more of

the i nterven ing IOUs.

22. In sum , the proposed rules affect the substantial

interests of a significant number of ratepayers represented by

the Public Counsel and Florida Industrial.

The challenged proposed rules

23. Portions of both the storm protection plan rule,

proposed rule 25 - 6.030; and the storm protection plan cost

recovery clause rule, proposed rule 25 - 6.031, have been

challenged in this proceeding. Specifically, t he proposed rules

at issue in this proceeding are proposed rules 25 - 6.030(3)(d),

25 - 6.030(3)(e), 25 - 6.030(3)(j), 25 - 6.031(6), and 25 - 6.031(7)(c).

24. S ubsection (3) and (4) of section 366.96, quoted

above, are implementing statutory provisions that apply to

proposed r ule 25 - 6.030, the storm protection plan rule.

25. Proposed rules 25 - 6.030(3)(d), 25 - 6.030(3)(e), and

25 - 6.030(3)(j), provide:

(3) Contents of the Storm Protection Plan.

For each Storm Protection Plan, the

following information must be provided:

* * *

(d) A description of each proposed storm

prot ection program that includes:

1. A description of how each proposed storm

protection program is designed to enhance

the utility’s existing transmission and

distribution facilities including an

estimate of the resulting reduction in

outage times and restor ation costs due to

extreme weather conditions;

2. If applicable, the actual or estimated

start and completion dates of the program;

3. A cost estimate including capital and

operating expenses;

4. A comparison of the costs identified in

subparagraph (3)( d)3. and the benefits

identified in subparagraph (3)(d)1.; and

5. A description of the criteria used to

select and prioritize proposed storm

protection programs.

(e) For the first three years in a

utility’s Storm Protection Plan, the utility

must provide the following information:

1. For the first year of the plan, a

description of each proposed storm

protection project that includes:

i. The actual or estimated construction

start and completion dates;

ii. A description of the affected existing

facilit ies, including number and type(s) of

customers served, historic service

reliability performance during extreme

weather conditions, and how this data was

used to prioritize the proposed storm

protection project;

iii. A cost estimate including capital and

operating expenses; and

iv. A description of the criteria used to

select and prioritize proposed storm

protection projects.

2. For the second and third years of the

plan, project related information in

sufficient detail, such as estimated number

and costs of projects under every specific

program, to allow the development of

preliminary estimates of rate impacts as

required by para graph (3)(h) of this rule.

* * *

(j) Any other factors the utility requests

the Commission to consider.

26. Proposed rules 25 - 6.030(2)(a) and (2)(b) define a

storm protection plan program and project:

(a) “Storm protection program” – a

category, type, or group of related storm

protection projects that are undertaken to

enhance the utility’s existing

infrastructure for the purpose of reducing

restoration costs and reducing outage times

associated with extre me weather conditions

therefore improving overall service

reliability.

(b) “Storm protection project” – a specific

activity within a storm protection program

designed for the enhancement of an

identified portion or area of existing

electric transmission or distribution

facilities for the purpose of reducing

restoration costs and reducing outage times

associated with extreme weather conditions

therefore improving overall service

reliability.

27. Proposed rule 25 - 6.030(3)(d) requires utilities to

file information about their storm protection programs in their

storm protectio n plans.

28. Section 366.96 makes no mention of the level of

project detail .

29. The nature of long - term planning is that plans become

less detailed as they stretch further into the future.

T herefore, it is rational that plans for the first year would be

more detailed than the plan s for two and three y ears into the

future. A plan can still explain the utility’s systematic

approach to achieving the statutory objectives without ha ving

the same level of detail in each of the first three years.

30. The rationality of a rule requiring less detail in

years two and three is further bolstered by the fact that the

utilities do not currently have that data, and creat ing it would

be costly. In addition, b ecause of greater potential for

inaccuracies , the requirement of more detailed projections

further out into the future could create customer frustration s

if planned projects are delayed or not undertaken .

31. The sta ndard the Commission wi ll use to evaluate a

utility’s s torm protection p lan is contained in s ection

366.96(4) , quoted above .

32. The Commission will not be determining cost recovery

when evaluating or approving storm protection plans.

33. Proposed r ule 25 - 6.030(3)(e)2. specifically directs

the utility to submit sufficient project level detail for the

develop ment of a preliminary ra te impact estimate.

34. Under the p roposed r ules, the utilities submitting the

plan will have the burden to demonstrate that the plans are

adequately detailed.

35. “Allowance for Funds Used During Construction” is an

accounting method by which a utility petitions the Commission to

recover what is essentially a carrying cost of funding for an

eligible utility project investment during its construction.

36. U nder existing Florida Administrative Code R ule

25 - 6.0141 , t he Commission determines if a utility me e t s the

requirements to prove an allowance for funds used during

construction . If the Commission deems th at a project is

eligible under r ule 25 - 6.01 41, recovery of such carrying costs

is permitted.

37. An allowance for funds used during construction is

added to the investment portion of an asset only after i t is put

into service.

38. The level of detail required by the proposed rule for

a storm protection plan does not affect or change how an

allowance for funds used during construction is tr eated p ursuant

to existing r ule 25 - 6.0141 .

39. Proposed r ule 25 - 6.030(3)(j) is another filing

category in addition to the other filing criteria set forth in

subsection (3) of proposed rule 25 - 6.03 0 . Proposed r ule

25 - 6.030(3)(j) allows the utilities to include information not

specifically required by the other parts of the rule , that a

utility believes will assist the Commission in assessing the

petition unde r the statutory factors. Proposed rule 25 -

6.030(3)(j) is not an additional evaluation criteria outside the

scope of section 366.96(4). Rather, t he proposed rule

recognizes that each utility is unique , and provides an

opportunity for utilities to provide individually tailored

information , for example, distinctiv e transmission and

distribution methods, which it would like the Commission to

consider .

40. The portions of proposed rule 25 - 6.031 the storm

protection plan cost recovery clause challenged in this

proceeding , include proposed rules 25 - 6.031(6) and 25 -

6.031(7)(c). They provide:

(6) Recoverable costs.

(a) The utility’s petition for recovery of

costs associated with its Storm Protection

Plan may include costs incurred after the

filing of the utility’s Storm Pr otection

Plan.

(b) Storm Protection Plan costs recoverable

through the clause shall not include costs

recovered through the utility’s base rates

or any other cost recovery mechanism.

(c) The utility may recover the annual

depreciation expense on capitalized Storm

Protection Plan expenditures using the

utility’s most recent Commission - approved

depreciation rates. The utility may

recover a return on the undepreciated

balance of the costs ca lculated at the

utility’s weighted average cost of capital

using the return on equity most recently

approved by the Commission.

(7) Pursuant to the order establishing

procedure in the annual cost recovery

proceeding, a utility shall submit the

following f or Commission review and approval

as part of its Storm Protection Plan cost

recovery filings:

* * *

(c) Projected Costs for Subsequent Year.

The projected Storm Protection Plan costs

recovery shall include costs and revenue

requirements for the subsequ ent year for

each program filed in the utility’s cost

recovery petition. The projection filing

shall also include identification of each of

the utility’s Storm Protection Plan programs

for which costs will be incurred during the

subsequent year, including a description of

the work projected to be performed during

such year, for each program in the utility’s

cost recovery petition.

41. The implementing authority for proposed r ules

25 - 6.031(6) and 25 - 6.031(7)(c) is section 366.96(7) and (8),

quoted above.

42. Proposed r ule 25 - 6.031(6) states that a utility cannot

recover costs through the clause that are recovered through base

rates or any other co st recovery mechanism. In fact, proposed

r ule 25 - 6.031 explicitly prohibits double - recovery by a utili ty.

43. Under the proposed r ule, a utility submitting a plan

will have the burden to demonstrate that its plan will not

incl ude any double recovery.

44. “Cost recovery clause” has specialized meaning ; it is

a term of art in the utility reg ulatory area. The Commission

currently administers a number of other cost recovery clauses,

and all of those cost recovery c lauses operate in the same way —

the Commission routinely establishes projected costs for the

next year that are collected from customers in the y ear they are

incurred through a factor on th e customer’s bills. That factor

also includes adjustments for true - ups the Commission makes for

the current and the previous year so that customers ultimately

never pay more or less than the utility’s actual prudently

incurred costs .

45. The way the clause process works, costs are passed on

to the customer in the same year that the costs are being

incurred.

46. Proposed r ule 25 - 6.031(7)(c) requires the utility to

file certain information regarding projecte d costs for the

subsequent year.

47. The consideration of projected costs is important in a

clause proceeding because if they are not considered, such costs

will be incurred , but deferred , and if ultimately approved , will

include interest on such deferral , which will increase costs to

customers.

CONCLUSIONS OF LAW

48. DOAH has jurisdiction over the subject matter and the

parties to this action in accordance with sections 120.56, 120.569, and 120. 57(1) .

Standing

49. Regarding standing to challenge a proposed rule,

section 120.56 (1) provide s , in pertinent part:

(1) GENERAL PROCEDURES . –

(a) Any person substantially affected by a

rule or a proposed rule may seek an

administrative determination of the

invalidity of the rule on the ground that

the rule is an invalid exercise of delegated

legislative authority.

(b) The petition challenging the validity

of a proposed or adopted rule under this

section must state:

1. The particular provisions alleged to be

invalid and a statement o f the facts or

grounds for the alleged invalidity.

2. Facts sufficient to show that the

petitioner is substantially affected by the

challenged adopted rule or would be

substantially affected by the proposed

rules.

50. With regard to a rule challenger’s burden of proof,

the pertinent portion of section 120.56 (2)(a) provide s:

(2) CHALLENGING PROPOSED RULES; SPECIAL

PROVISIONS. –

(a) . . . . The petitioner has the burden

to prove by a preponderance of the evidence

that the petitioner would be substantially

affected by the proposed rule.

51. Section 120.56 allows a person who is substantially

affected by a rule or agency statement to initiate a rule

challenge. Pursuant to s ection 120.56(1)(e), other

substantially affected persons may join in the proceedings as

intervenors. To have standing under the “substantially

affected” test, generally a party must demonstrate that: 1) the

rule will result in a real and i mmediate injur y in fact ; and

2) the alleged injury is within the zone of interes t to be

protected or regulated. Jacoby v. Fla. Bd. of Med. , 917 So. 2d

358 (Fla. 1st DCA 2005).

52. The anticipated regulatory costs and rate increases

from the proposed rules will have a real and immediate impact

upon the interests of the IOU’s ratepayers. T he proposed rules

provide a process by which IOUs may obtain approval to charge

increased rates or fees to ratepayers as a means of obtaining

reimbursement of the capital expen ded by IOUs in pursuit of

storm protection projects and a financial return on the IOU's

capital investment. T he proposed rules proscribe the method by

which such charges will be determined and approved .

53. Protection of the c ustomer s’ rates is expressly within

the zone of interest to be protected by the statute. Section

366.96(4)(c) requires the Commission to consider costs and

benefits to the utility and its customers, and section

366.96(4)(d) requires the Commission to consider th e estimated

annual rate impacts resulting from implementing the IOUs’ storm

protection plans.

54. The Public Counsel and Florida Industrial met their

burden , under s ection 120.56(2)(a), by a prepo nderance of the

evidence, that the interests they represent will be

substantially affected by the proposed rules.

55. The Public Counsel ’s standing to challenge the

Commission’s proposed rules has been settled for decades. See ,

e.g. , Citizen s of the State of Fla. v. Pub. Serv. Comm’n , Case

No. 92 - 5717RP (Fla. DOAH, Mar. 26, 1993); Citizens of the State

of Fla. v. Mann , Case No. 79 - 1124RP (Fla. DOAH, Feb. 22, 1980).

56. The Public Counsel , as the statutorily au thorized

representative of the c itizens of the State of Florida, who are

ratepayers of the Intervening IOUs, has standing because the

ratepayers that the Public Counsel represents are substantially

affected by the proposed rules.

57. The regulatory costs of the proposed rules will be

passed on to ratepayers through base rates and the costs of

implementing approved storm protection plans will be added as

clause charges to customers’ bills , separate and apart from base

rates.

58. Ratepayers represented by the Public Counsel and

Florida Industrial are ultimately responsible to pay for the

incre ased regulatory costs in the IOUs’ base rates and also to

pay the storm protection plan cost recovery clause charges under

the proposed r ules.

59. “To meet the requirements of section 120.56(1), an

association must demonstrate that a substantial number of its

members, although not necessarily a majority, are ‘substantially

affected’ by the challenged rule.” Fla. Home Builders Ass’n v.

Dep’t of Labor and Emp’t Sec. , 412 So. 2d 351, 353 (Fla. 1982).

60. Testimony and evidence submitted at the hearing

demonstrated that Florida Industrial is comprised of large

industrial users of electric power who, as in the case of

ratepayers represented by the Public Counsel, are substantially

affected as ratepayers of the IOUs. Accordingly, Florida

Industrial has standing and Florida Power’s Motion to Dismiss

Florida Industrial is denied .

The Commission’s burden

61. With regard to an agency’s burden in upholding a

challenged proposed rule, the pertinent part of section

120.56 ( 2 ) (a) provide s:

The agency then has the burden to prove by a

preponderance of the evidence that the

proposed rule is not an invalid exercise of

delegated legislative authority a s to the

objections raised . . . .

62. Sect ion 120.52(8) provides:

(8) “Invalid exercise of delegated

legislative authority” means an action that

goes beyond the powers, functions, and

duties delegated by the Legislature. A

proposed or existing rule is an invalid

exercise of delegated legislative authority

if any one of the following applies:

(a) The agency has materially failed to

follow the applicable rulemaking procedures

or requirements set forth in this chapter;

(b) The agency has exceeded its grant of

rulemaking authority, citation to which is

required by s. 120.54(3)(a)1.;

(c) The rule enlarges, modifies, or

contravenes the specific provisions of law

implemented, citation to which is required

by s. 120.54(3)(a)1.;

(d) The rule is vague, fail s to establish

adequate standards for agency decisions, or

vests unbridled discretion in the agency.

(e) The rule is arbitrary or capricious. A

rule is arbitrary if it is not supported by

logic or the necessary facts; a rule is

capricious if it is adopted without thought

or reason or is irrational; or

(f) The rule imposes regulatory costs on

the regulated person, county, or city which

could be reduced by the adoption of less

costly alternatives that substantially

accomplish the statutory objectives.

A grant of rulemaking authority is necessary

but not sufficient to allow an agency to

adopt a rule; a specific law to be

implemented is also required. An agency may

adopt only rules that implement or interpret

the specific powers and duties granted by

the enabling statute. No agency shall have

authority to adopt a rule only because it is

reasonably related to the purpose of the

enabling legislation and is not arbitrary

and capricious or is within the agency’s

class of powers and duties, nor shall an

agenc y have authority to implement statutory

provisions setting forth general legislative

intent or policy. Statutory language

granting rulemaking authority or generally

describing the powers and functions of an

agency shall be construed to extend no

further t han implementing or interpreting

the specific powers and duties con ferred by

the enabling statute.

63. Therefore, t he Commission has the burden to prove , by

a preponderance of the evidence , that the proposed rules are not

invalid, in whole or in part, as to the objections raised by the

Public Counsel and Florida Industrial (collectively, the

Challengers) . The proposed rules are not presumed to be valid

or invalid. § 120.56(2) , Fla. Stat .

Proposed r ule 25 - 6. 030(3)(d)

64. Section 366.96(4)(d) requires the Commission to consider

the “estimated annual rate impact resulting from implementation of

the plan during the first 3 years addressed in the plan” in

determining whether to approve a plan.

65. The Challengers assert that proposed rule 25 - 6.030(3)(d)

i s imper missibly vague and contravenes s ection 366.96 because it

does not require project - level detail sufficient to “enable the

Commission to conduct the review required by s ection 366.96(4),

Florida Statutes.” Petition at ¶ 32.

66. The preponderance of the evidence, however, demonstrates

that the Commission will be able to prepare the required rate

estimate under the proposed rule. The storm protection plan

rule proposed by the Commission requires a detailed description

of each storm protectio n program, project - level detail for the

first year of the plan, and “ project - related ” information for the

second and third years “in sufficient detail . . . to allow the

development of preliminary estimates of rate impacts.” See

proposed r ule 25 - 6.030(3)(d) - (e). T his information is sufficient

to facilitate preparation of the required estimated rate impacts ,

and the terms of the proposed ru le in that regard demonstrate

that the Commission validly exercised its delegated leg islative

authority in drafting proposed r ule 25 - 6.030.

67. The Challengers further claim that unless proposed r ule

25 - 6.030(3)(d) requires project - level detail for years two and

three of the Plan , double recovery will not be able to be

detected because project information will be unobtainable th rough

discovery. The evidence does not support this contention. The

idea that double recovery will be undetectable is also

inconsistent with applicable law.

68. Under other types of c ost - recovery clause proceeding s ,

as well as the cost recovery clause under proposed rule 25 - 6.031,

the u tilities have the burden to prove that costs are not double -

recovered through both base rates and the new cost - recovery

clause. See p r oposed r ule 25 - 6.031(2); proposed r ule 25 -

6.031( 6)(b) (prohibiting double recovery) . If a utility’s initial

filing fails to meet this burden, cost information related to

potential double recovery will be relevant and discoverable.

69. S ection 366.093(2), states that “[i]nformation which

affects a utility’s rates or cost of service shall be considered

relevant for purposes of discovery in any docket or proceeding

where the utility’s rates or cost of service at issue.”

70. Further, even if Commission Staff and the Public Counsel

are unable to obtain the necessary information through routine

discovery requests, the Commission itself can access that

information through its express statutory authority to issue data

requests and perform inspe c tions and audits. See §§ 366.04(2)(f);

366.08, Fla. Stat.

71. Finally, if information is not provided in sufficient

detail for the Commission to carry out is statutory duties, it has the authority to deny approval of the p lan. See § 366.96(5),

Fla. Stat.

72. The Challengers further claim that the Commission will

be unable to assess rate impacts because the Commission lacks

sufficient information regarding how utilities plan to recover

carrying costs associated with storm protecti on projects. Th is

contention is speculative, at best.

73. The Commission determines whether a utility project may

accrue carrying costs , kn own as “ allowance for funds used during

construction ,” by assessing whether the project is eligible under

the requirements of existing r ule 25 - 6.014 1 . As Mr. Willis

explained in his testimony , these carrying costs are “tacke d onto

the costs” of a project. For recovery, e ach utility must submit

program - level and project - level cost information as part of their

plan. See proposed r ule 25 - 6.030(3)(d) - (e).

74. Since carrying costs are “tacked onto” project costs,

utilities will be required to include an estimated amount of

carrying costs as a component of these cost estimates. If the

utilities fail to do so, Commission Staff and the Public Counsel

can request t his information through discovery.

75. Proposed rule 25 - 6.030(3)(d) is not vague. It requires

utilities to file information about their storm protection

programs in their storm protection plans. A storm protection

program is defined in proposed rule 25 - 6.030(2)(a). There is no

contention that there is confusion as to what constitutes program -

level detail.

76. Further, p roposed rule 25 - 6.030(3)(d) does not exceed

the Commission’ s grant of rulemaking authority. R ather , as

directed in section 366.96(3) , the proposed rule specifies the

elements to be included in utilities’ filings for the Commission’s

review of storm protection plan s .

77. In sum, p roposed r ule 25 - 6.030(3)(d) is not a n in valid

exercise of delegated legislative authority.

Proposed r ule 25 - 6.030(3)(e)

78. The Challengers argue that proposed ru le 25 -

6.030(3)(e) contravenes section 366.96 because the statute

requires a utility’s storm protection plan to have the same

project - level detail for each of its first three years. The

statute nev er mentions project - level detail. The statute says,

“[e]ach plan must explain the systematic approach the utility

will follow to achieve the objectives of reducing restoration

costs and outage times associated with extreme weather events.”

§ 366.96(3) , Fl a. Stat .

79. Given the fact that long - term plans become less

detailed the further they stretch into the future , it is

rational to require more d etail in the first year than in the

future second and third years .

80. Requiring less detail in years two and three is also

supported by the fact that the utilities do not currently have

that data, and it would be expensive to create. Because plans

become less accurate the further they are projected into the

future, requiring more de tail could also create customer

frustration when planned projects are delayed or abandoned.

81. The Challengers also argue that project - level detail

in the first three years of the plan is required to ensure that

costs recovered through the storm protecti on plan cost recovery

clause are not being recovered through some other mechanism,

like base rates.

82. The utilities, not the Commission, and not the

Challengers , have the burden to prove that costs recovered

through the clause are not recovered elsewhere. But if that

information is needed, it should be provided through a cost

recovery clause proceeding, not the storm protection plan

approval proceeding.

83. L ike proposed r ule 25 - 6.030(3)(d), subsection (3)(e)

does exactly what section 366.96(3) directs the Commission to

do: adopt a rule that specifies elements that must be included

in a utility’s filing for review of storm protection plans;

therefore, it does not exceed the Commission’s grant of

rulemaking authority. See Sw. Fla. Water Mgmt. Dist. v. Save

the Manatee Club, Inc. , 773 So . 2d 594, 598 – 600 (Fla. 1st

DCA 2000).

84. Proposed r ule 25 - 6.030(3)(e) is also not vague. The

term “sufficient detail” is defined in subsection (3)(e) through

use of an example (“estimated number and costs of projects under

every specific program”) and by cross - reference to proposed r ule

25 - 6.030 (3)(h) , (which requires the utility to provide “[a]n

estimate of rate impacts for each of the first three years of

the Storm Protection Plan for the utility’s typical residential,

commercial, and industrial customers”).

85. Proposed r ule 25 - 6.030(3)(e) does not fail to

establish adequate standards for the agency’s decision and does

no t vest the Commission with unbridled discretion because

p roposed r ule 25 - 6.030(3)(e) is a filing requirement, not a

standard for the Commission’s decision. The standard the

Commission will u se to evaluate a utility’s storm protection

p lan is contained in s ection 366.96(4) and , ultimately , what is

in the public interest. See § 366.96(5) , Fla. Stat. (stating

that the Commission shall determine whether it is in the public

interest to approve, modify, or deny the plan).

86. Therefore, proposed r ule 25 - 6.030( 3)(e) is not an

in valid exercise of delegated legislative authority.

Proposed r ule 25 - 6.030(3)(j )

87. The Challengers argue that nothing in the enabling

statute allows the Commission to consider “any other factors”

allowed by proposed rule 25 - 6.030(3)(j) ; that “any other

factors” is not a sufficiently explicit standard and is so vague

that it gives the Commission unbr idled discretion; and that the

proposed r ule is arbitrary and capricious.

88. As part of the Commission’s rule specifying what a

utility m ust file in its s torm protection plan, p roposed r ule

25 - 6.030(3)(j) merely allows a utility to file whatever other

information it believes is relevant to the Commission’s

assessment of its plan s but not captured by the filing

requirements in subsection ( 3) of the proposed r ule.

89. Proposed r ule 25 - 6.030(3)(j) is not an additional

evaluation criteria outside of section 366.96(4). If this was

all that was required, the rule might be vague. But, as

discussed above, it is merely a catch - all in addition to n ine

other specific requirements.

90. Finally, p roposed r ule 25 - 6.030(3)(j) is neither

arbitrary n or capricious. Section 366.96(3) requires each

public utility to file a storm protection plan, but all

utili ties are not the same. Proposed r ule 25 - 6.030(3)(j) allows

each utility the opportunity to provide information that is

unique to the utility that the utility wishes the Commission to

consider when evaluating its individual storm protection plan.

It is logical and reasonable to give each util ity an opportunity

to provide information that would assist the Commission in

making a sound, reasoned decision that is in the public interest

as to a utility’s individual storm protection plan.

91. Thus, p roposed r ule 25 - 6.030(3)(j) is not a n in valid

ex ercise of delegated legislative authority.

Proposed r ule 25 - 6.031(6)

92. The Challengers argue that p roposed r ule 25 - 6.031(6)

exceeds the Commission’s grant of rulemaking authority and is

vague because it fails to provide an adequate standard for the

Commission to distinguish non - recoverable costs from recoverable

costs.

93. P roposed r ule 25 - 6.031(6) , however, is not vague and

does not enlarge, modify, or contravene the law implemented. In

implementing s ection 366.96(8), p roposed r ule 25 - 6.031(6)(b)

requires a utility in a cost recovery clause proceeding to

prove , by a preponderance of the evidence , that any costs

recover ed through the clause are not in the utility’s base

rates.

94. The prohibition again st double recovery in proposed

r ule 25 - 6.031(6) does not enlarge or contravene s ection 366.96.

Rather, t he language in the proposed rule is drawn directly from

the statute. Both the statute and proposed rule share the same

prohibition against double recovery.

95. The Challengers further claim that proposed rule 25 -

6.031(6) exceeds the Commission’s grant of rulemaking authority

and the law implemented because section 366.96 only allows an

investor - owned utility to recoup costs that have already been

incurred, rather than projected costs. Proposed rule

25 - 6.031(6) , however, is consistent with section 366.96(7) and

(8), as well as standard Commission practice in all cost

recovery clause matters. As discussed below in more detail with

regard to the Challenger’s challenge to p roposed rule 25 -

6.031(7)(c), section 366.96 allows the collection of projected

co sts because it establishes a cost recovery clause proceeding ,

and cost recovery clause proceedings allow for the collection of

projected costs.

96. Further, proposed rule 25 - 6.031(6) is not vague.

There is nothing confusing about the language used in the

proposed rule -- it forbids double recovery. Regulated utilities

can readily understand its meaning -- they may not recover costs

through the clause that they are already recovering through base

rates.

97. The Challengers also claim that the proposed rule’s

prohibition against double recovery is vague because it does not

say how utilities should prove that they are not double

recovering. However, the statute does not re quire the

Commission to articulate the type of proof necessary to

demonstrate avoidance of double recovery, and such requirement

is otherwise unnecessary because, under the proposed rule,

utilities submitting plans will have the burden of demonstrating

tha t their plan s d o not include double recover y.

98. In sum, proposed r ule 25 - 6.031(6) is not a n invalid

exercise of delegated legislative authority.

Proposed r ule 25 - 6.031(7)(c )

99. The Challengers argue that proposed r ule 25 - 6.031(7)

is vague, fails to provide adequate standards for agency

decisions, and provides unbridled discretion to the Commission

because it permits investor - owned utilities to request and

receive recovery of estimated projected costs.

100. Proposed r ule 25 - 6.031(7)(c) does not exceed the

Commission’s grant of rulemaking authority nor does it enlarge,

modify, or contravene the law implemented.

101. Section 366.96(7) creates the “storm protection plan

cost recovery clause,” through which the Commiss ion is required

to “conduct an annual proceeding to determine the utility’s

prudently incurred transmission and distribution storm

protection plan costs and allow the utility to recover such

costs through a charge separate and apart from the utility’s

base rates.”

102. The term or phrase “cost recovery c lause” has

specialized meaning; it is a term of art in the uti lity

regulatory area. “[I]n considering the meaning of particular

words and phrases, courts must . . . distinguish between terms

of art that may have specialized meanings and other words that

are ordinarily given a dictionary definition.” OB/GYN

Specialists of Palm Beaches, P. A. v. Mejia , 134 So. 3d 1084,

1088 (Fla. 4th DCA 2014).

103. The Commission currently administers a number of

other cost recovery clauses, and all those cost recovery c lauses

operate in the same way -- the Commission establishes projected

costs for the next year that are collected from customers in the

next year when they are incurred through a factor on th e

customer’s bills. That factor also includes true - up adjustments

for the current and previous yea r to adjust for overbillings or

underbillings so that customers never pay more ( or less ) than

actual costs . The way the clause process works, costs are

passed on to the customer in the same year that the costs are

occurring. The consideration of projecte d costs is important in

a clause proceeding because if they are not considered, such

costs will be accrued but deferred and , if ultimately approved ,

will include interest on such deferral, which would cost

customers more in deferred cost s.

104. Section 36 6.8255 uses the same “cost recovery clause”

term of art , and supports the Commission’s inte rpretation of

section 366.96. Section 366.8255(1)(d) defines “Environmental

compliance costs” as including “all costs or expenses incurred

by an electric utility in complying with environmental laws or regulations.” (emphasis added). Section 366.8255(2) states , in pertinent part:

If approved, the commission shall allow

recovery of the utility’s prudently incurred

environmental compliance co sts, . . . through an environmental compliance cost - recovery factor that is separate and apart from the utility’s base rates.

(emphasis added).

Like section 366.96(7), s ection 366.8255 uses the past

tense, requiring the Commission to allow recovery of “ pr udently

incurred” costs. While the Challengers argue that section

366.8255 is different from Section 366.96 because it authorizes

recovery of projected costs, a closer reading of section

366.8255(3) shows that it is just describing the mechanism for

recovery of prudently incurred costs used by the Commission in

al l of its cost recovery clauses , under which cost - recovery

factor s are set at least annually based on projected costs that

are “trued - up” to ultimately allow the utility to recover its

actual prudently incurred costs. See also § 366.8255(5), Fla.

Stat. (“A ny costs recovered in base rates may not be recovered

in the cost - recovery clause”).

105. By using the terms “cost recovery claus e” in section

366.96(7), the Legislature created a cost recovery clause like

the one created in s ection 366.8255 and like a ll other cost

recovery clauses the Commission administers.

106. Proposed r ule 25 - 6.031(7)(c) is valid because it

requires a utility seeking cost recovery under section 366.96 to

provide information on trued - up costs, estimated trued - up costs,

project ed costs, and proposed factors , all of which is necessary

for the Commission to administer a cost recovery mechanism like

section 366.8255(3) and all of its other cost recovery clauses.

Proposed r ule 25 - 6.031(7)(c) is not vague. It is very specific

as to th e information a utility must file.

107. Moreover, subsection (7)(c) is a filing requ irement

for the utility ; it is not a standard for the agency’s decision

and does not vest unbridled discretion in the Commission. The

standard the Commission will use to evaluate whether the costs

are prudently incurred transmission and distribution storm

protect ion plan costs is contained in s ection 366.96(7).

108. In sum, proposed r ule 25 - 6.031(7)(c) is not a n

in valid exercise of delegated legislative authority.

The Commission followed applicable rulemaking procedures

109. The Challengers allege that the Commission materially

failed to follow applicable rulema king procedures set forth in

c hapter 120, raising issues about the SERC , and the November 5,

2019 , public hearing.

The SERC

110. A SERC must include “an economic analysis” regarding

the potential impacts of a proposed rule on areas including

economic growth, private sector job creation, and business

competitiveness. See § 120.541(2)(a)1 - 3 . , Fla. Stat.

111. In the SERC , the Commission stated that it had

determined that the proposed rules would not have an adverse

impact on small business. The Challengers object to the

Commission’s economic analysis on the grounds that it improperly limited the review and analysis to the IOUs , making much of the

fact that utility customers , many of whom are small businesses,

will ultimately bear any increase in rates . Those rate increase s,

however, would not com e from the proposed rules, but rather from

costs that utilities may be allowed to recover und er future

storm protection plan cost recovery clause proceedings under

section 366.96 .

112. Section 366.96 is the authorizing statute. Nothing in

s ection 120.541 requires agencies to consider the costs imposed by

the statute authorizing the agency to engage in rulemaking.

113. Section 120.54(3)(b)1. specifically states: “Before

the adoption, amendment, or repeal of any rule . . ., an agency

is encouraged to prepare a statement of estimated regulatory

costs of t he proposed rule.”

114. T he SERC examined all the statutory criteria required

by section 120.542(2)(a) and comports with the requirements of

sections 120.54(3)(b) and 120.541(2). The IOUs are the only

entities that a re required to comply with the propose d r ules.

Therefore , the Commission did not err when it limited its

analysis when developing the SERC to these ent ities, and only

considered the potential cost impacts of the proposed r ules,

instead of the cost impacts of the statute .

115. Moreover, the Challengers waived their right to

challenge the SERC by not responding in writing within the

21 - day period indicated in the F.A.R. Notice. See Hale v. Dep't

of Rev. , 973 So. 2d 518, 522 (Fla. 1st DCA 2007) (stating that

“‘[w]aiver’ is the ‘intentional relinquishment or abandonment of a known right or privilege, or conduct that warrants an

inference of the intentional relinquishment of a known

right.’”). The Commission’s October 7, 2019 , F.A.R. Notice of

Proposed Rule, in accordance with section 120.54(3)(a)1.,

included a summary of the SERC and a statement that any person

who wishes to provide the agency information regarding the SERC

or to provide a proposal for a lower cost regulatory alternative

must do so in writing within 21 days after publicatio n of the

notice. The Commission received no information on the SERC and

no requests for a lower cost regulatory alternative in writing

within 21 days of the October 7, 2019 , F.A.R. Notice .

The November 5, 2019 , Public Hearing

116. The Commission followed all applicable rulemaking

procedures when it held the public hearing the Public Counsel

requested on November 5, 2019. The Commission published the

required F.A.R. notice seven days before the public hearing,

pursua nt to s ection 120.525(1) . Section 120.54(3)(e)2. states

that the term “public hearing” includes any public meeting held

by the agency at which the rule is considered, so it was not a

violation of section 120.54 to hold the public hearing as part

of the Commissi on’s regular agenda conference.

117. The Commission did not abuse its discretion when it

denied the Public Counsel ’s motion for a continuance of the

public hearing and its motion to initiate formal proceedings. A

dr aw - out hearing is not required merely because a person alleges

that its interests will not be protected by the rulemaking

process. Corn v. Dep’t of Legal Aff. , 368 So. 2d 591, 593

(Fla. 1979). In ruling on a request for a draw - out proceeding, the agency is required to “exercise its discretion and make an

express determination” as to whether proceedings under section

120.54 would adequately protect the person’s asserted interests.

Bert Rogers Sc h. of Real Estate v. Fla. Real Estate Comm’n ,

339 So. 2d 226, 228 (Fla. 4th DCA 1976).

118. In addition to finding that the request for a draw -

out proceeding was untimely, the Commission made express

determinations that the Public Counsel failed to show why a

continuance was necessary and failed to affirmatively

demonstrate that a public hearing conducted under section

120.54(3)(c)1. would not give the Public Counsel an adequate

opportunity to protect its substantial interests. The

Commission’s decision s were not arbitrary, fanciful, or

unreasonable. See Graham v. State , 2 07 So. 3d 1 35, 142

(Fla. 2016).

119. Pursuant to s ection 120.54(3)(c), the Commission

considered all arguments and evidence. It made part of the

rulemaking record all material pertine nt to the issues under

consideration at the public hearing that were submitted to the

Commission within 21 days after the date of the publication of

the October 7, 2019 , F.A.R. Notice of Proposed Rule and through

the end of the final public hearing on November 5, 2019.

(Ex. J - 48, J - 50.)

120. The Challengers’ further assertion that the

Commission did not allow Kelly Cisarik and Florida Industrial to

participate at the hearing is not supported by the record . See

Petition at ¶ 57 (noting Public Counsel was permitted “to read

[Ms. ] Cisarik’s testimony into the record.”); Exh. J - 48 at 24 - 29

(Public Counsel reading Ms. Cisarik’s letter into the record);

Exh. J - 48 at 98 (Fl orida Industrial permitted to ask questions).

121. In sum, t he Commission did not fail to follow

rulemaking procedures and otherwise complied with all applicable

rulemaking procedures and re quirements in s ections 120.54 and

120.541.

CONCLUSION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is ,

O RDERED that:

1. Proposed r ules 25 - 6.030(3)(d), 25 - 6.030(3)(e),

25 - 6.030(3)(j), 25 - 6.031(6), and 25 - 6.031(7)(c) are not in valid

exercises of delegated legislative authority; and

2. The Petition of the Public Counsel and challenges

asserted by Florida Industrial against the proposed rules are

Dismissed.

DONE AND ORDE RED this 21st day of January, 2020 , in

Tallahassee, Leon County, Florida.

JAMES H. PETERSON, III

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative H earings

this 21st day of January , 20 20 .

ENDNOTE

1/ 2019 All references to Florida Statutes are to the current

version s unless otherwise indicated.

COPIES FURNISHED :

James Ray Kelly, Public Counsel Charles John Rehwinkel, Deputy Public Counsel

A. Mireille Fall - Fry, Esquire

Thomas A. David, Esquire

Office of Public Counsel

111 West Madison Street , Room 812

Tallahassee, Florida 32399

(eServed)

Keith Charles Hetrick, General Counsel

Samantha Cibula, Esquire

Andrew King, Esquire

Adria Elise Harper, Esquire

Florida Public Service Commission

2540 Shumard Oak Boulevard

Tallahassee, Florida 32399 - 0850

(eServed)

Jon C. Moyle, Esquire

Karen Ann Putnal, Esquire

Moyle Law Firm, P.A.

118 North Gadsden Street

Tallahassee, Florida 32301

(eServed)

J. Jeffry Wahlen, Esquire

Ausley & McMullen

227 South Calhoun Street

Post Office Box 391

Tallahassee, Florida 32302

Jason B. Gonzalez, Esquire

Daniel Elden Nordby, Esquire

Amber Stoner Nunnally, Esquire

Shutts & Bowen, LLP

Suite 804

215 South Monroe Street

Tallahassee, Florida 32301

(eServed)

Kenneth M. Rubin, Esquire

Florida Power & Light Company

700 Unive rse Boulevard

Juno Beach, Florida 33408

Russell A. Badders, Esquire

Beggs & Lane

Post Office Box 1295 0

Pensacola, Florida 32591

Malcolm N. Means, Esquire

James Dawson Beasley, Esquire

Ausley McMullen

Post Office Box 391

Tallahassee, Florida 32302

(eServed)

Matthew Bernier, Esquire

Duke Energy Florida, LLC

Suite 800

106 East College Avenue

Tallahassee, Florida 32301

(eServed)

Dianne Miplett, Esquire

Duke Energy Florida, LLC

299 Fir st Avenue North

St. Petersburg, Florida 33701

(eServed)

Adam Teitzman, Commission Clerk

Office of the Commission Clerk

Public Service Commission

2540 Shumard Oak Boulevard

Tallahassee, Florida 32399 - 0850

(eServed)

Braulio Baez, Executive Director

Public Service Commission

2540 Shumard Oak Boulevard

Tallahassee, Florida 32399 - 0850

(eServed)

Ernest Reddick, Program Administrator

Anya Grosenbaugh

Florida Administrative Code & Register

Department of State

R . A. Gray Building

500 South Bronough Street

Tallahassee, Florida 32399 - 0250

(eServed)

Ken Plante, Coordinator

Joint Admin istrative Proced ure Committee

Room 680, Pepper Building

111 West Madison Street

Tallahassee, Florida 32399 - 1400

(eServed)

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is

entitled to judicial review pursuant to section 120.68, Florida

Statutes. Review proceedings are governed by the Florida Rules

of Appellate Procedure. Such p roceedings are commenced by

filing one copy of a Notice of Administrative Appeal with the

agency clerk of the Division of Administrative Hearings and a

second copy, accompanied by filing fees prescribed by law, with

the District Court of Appeal, First Dist rict, or with the

District Court of Appeal in the appellate district where the

party resides. The Notice of Administrative Appeal must be

filed within 30 days of rendition of the order to be reviewed.