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<title>July 2000: Florida Public Service Commission Clarifies "Self-Service
Wheeling" Rule</title>
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<p align="left"><strong><small><font face="Arial">About The Author:</font></small></strong></p>
<p align="left"><font face="Arial" style="font-size: 9pt">Robert A. Olson is a partner in the law firm of
Brown, Olson & Gould, P.C. which maintains a nationwide practice in energy law,
public utility law and related commercial transactions.</font></p>
<p><small><font face="Arial"><font style="font-size: 9pt">He can be reached at:</font><br>
<br>
<b><font color="#0000FF">Brown, Olson & Gould, PC</font></b><br>
2 Delta Drive<br>
Suite 301<br>
Concord, NH 03301<br>
<a href="mailto:[email protected]">[email protected]</a><br>
(603) 225-9716<br>
<a href="mailto:[email protected]"></a></font></small></p>
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<td width="70%" valign="top"><img src="../images/statelin.gif" alt="STATELINE by Robert Olson" border="0" WIDTH="375" HEIGHT="75"><p><b><u><br>
July 2000</u><br>
<font face="Arial" size="5">Florida Public Service Commission
Clarifies <br>
"Self-Service Wheeling" Rule <br>
</font>
</b><strong>by Robert Olson -- Brown, Olson and Wilson, P.C.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
2000/08</em>)</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">On June 20, 2000, the Florida Public
Service Commission (FPSC) voted to approve staff’s recommendation to
grant an industrial customer group’s request to permit
"self-service wheeling" in the service territory of Tampa
Electric Company (TECO) if certain conditions are met. Florida has not
enacted legislation authorizing retail electric competition. As proposed
by the Florida Industrial Power Users Group (FIPUG), "self-service
wheeling" involves a generating facility located outside or inside
TECO’s franchise area wheeling power to another location owned by the
same customer inside TECO’s franchise area. The customer receiving the
wheeled power must be a TECO non-firm retail customer, meaning a customer
who is subject to a tariff under which its power supply could be
interrupted in certain circumstances. Under the FIPUG proposal and under
an existing FPSC rule, TECO would be obligated to provide transmission and
distribution services to wheel the power to the retail customer.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">The FPSC staff recommendation
concluded that the self-wheeling approval sought by FIPUG should be
permitted provided the self-wheeling proposal meets conditions contained
in administrative rule, Rule 25-17.0883 as discussed further below. A
request to self-wheel under Rule 25-17.0883 will be treated as a request
to obtain transmission and distribution services from TECO. A customer may
petition the FPSC for relief if TECO fails to wheel the power as
requested. At the FPSC’s meeting on June 20, 2000, the scope of Rule
25-17.0883 was clarified to state that the rule pertains to more
circumstances than just the FIPUG self-wheeling proposal. For example, the
rule does not limit self-wheeling to situations where a non-firm customer
is interrupted or is purchasing buy-through power. No customer has yet
asked to self-wheel power and FIPUG did not identify any non-firm retail
customers who may seek permission to self-wheel.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">Rule 25-17.0883 requires utilities
to provide transmission and distribution services to retail customers for
the transmission of power generated at one location of a customer’s
facilities to another location when certain conditions are met. One of the
conditions requires that the provision of self-wheeled power and its
associated charges, terms, and other conditions may not be
"reasonably projected to result in higher cost electric service to
the utility’s general body of retail and wholesale customers." This
requirement will be analyzed using the FPSC’s "cost effectiveness
methodology", and this methodology may be adjusted to reflect
"the qualifying facility’s contribution to the utility for standby
service and wheeling charges, other utility program costs, the fact that
qualifying facility self-service performance can be precisely metered and
monitored, and taking into consideration the unique load characteristics
of the qualifying facility compared to other conservation programs."
The rule also requires that the provision of self-wheeled power and its
associated charges, terms and other conditions may not "adversely
affect the adequacy or reliability of electric service to all
customers."</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">The issue of self-wheeling arose in
a motion filed by FIPUG seeking relief for power interruptions. TECO has
33 customers who receive service under IS-1 and IS-3 rate schedules. These
rate schedules are for "non-firm" customers, who have agreed to
have their power interrupted in exchange for rates discounted by 54
percent of average retail rates. All of these non-firm customers have also
elected a "buy-through" option in which the customers can elect
to direct TECO to purchase power on their behalf to avoid actual
interruption of service. TECO is the exclusive agent for these buy-through
power purchases. FIPUG claimed that in 1999 TECO’s non-firm customers
were interrupted on 16 occasions and TECO purchased power on their behalf
on 139 occasions. The price for replacement power, FIPUG claims, has
reached up to $3,400 per megawatt-hour. The tariff permits TECO to
interrupt power to these non-firm customers when the reliability of power
for TECO’s firm customers is threatened, but not for
"economic" reasons.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">FIPUG alleged that TECO interrupted
non-firm customers for economic reasons, and also alleged that, because of
TECO’s small reserve margin, the FPSC has authority during these periods
of curtailment to grant non-firm customers relief enabling them to
purchase less expensive substitute power. FIPUG asserted that TECO engages
in wholesale power sales at peak times when its non-firm customers are
interrupted or exposed to buy-through power costs. TECO contested this
assertion, stating that its policy is to not make such sales while
simultaneously making buy-through purchases for its non-firm customers,
although TECO recognized that some minimal sales may actually occur as a
result of concluding pre-existing sales. According to the FPSC staff, the
source of the dispute may lie in a contract TECO has to sell wholesale
power to the Florida Municipal Power Agency (FMPA). The FMPA contract,
scheduled to expire on March 15, 2001, reduced TECO’s reserve margin to
near 15 percent. FIPUG requested that the relief it seeks be available
until January 1, 2004, when TECO expects to have a reserve margin of 20
percent. The staff found that FIPUG had not satisfactorily demonstrated
that TECO interrupted non-firm customers for economic reasons, and denied
FIPUG’s request to curtail TECO’s lawful wholesale power sales.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">FIPUG also requested that TECO’s
non-firm retail customers be permitted to obtain energy from providers
other than TECO, either through contracts with other utilities or other
power generators. The staff concluded that this would establish retail
wheeling, contrary to state law, and would impose a burden on the
remaining customers to generate revenue to recover the utility’s fixed
costs. The PSC staff did, however, comment that non-firm retail customers
could potentially arrange to "shop" for power but still have
TECO take title to the power, depending on whether it is feasible in terms
of economic, legal, regulatory, operational, and financial factors. The
staff also denied FIPUG’s request that the FPSC direct TECO to reduce
the buy-through power rate. In support of its recommendation, the staff
stated customers may not be relieved of their obligation to pay base rate
charges and that the $0.002 per kWh fee added for buy-through purchases is
in lieu of other per kWh charges, such as non-fuel energy charges and
adjustment clause charges.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">The FPSC is scheduled to issue an
order reflecting its June 20 vote and decision by July 10, 2000.</font></p>
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<blockquote>
<p align="left"><font face="Arial">
<small>Robert A. Olson is a partner in the law firm of Brown, Olson &
Gould P.C.
which maintains a nationwide practice in energy law, public utility law and related
commercial transactions. He can be reached at:</small></font><p align="center">
<font face="Arial"><small><font color="#0000FF"><b>Brown, Olson & Gould, PC</b></font><br>
2 Delta Drive, Suite 301<br>
Concord, NH 03301 <br>
<br>
<a href="mailto:[email protected]">[email protected]</a> | (603) 225-9716<a href="mailto:[email protected]"></a></small></font>
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