HB 1631

1
A bill to be entitled
2An act relating to air quality; amending s. 366.8255,
3F.S.; redefining the term "environmental laws or
4regulations" to include certain agreements entered into by
5electric utilities with the Department of Environmental
6Protection; redefining the term "environmental compliance
7costs" to include costs related to certain air pollution
8control equipment; providing for cost recovery by electric
9utilities under certain circumstances; creating s.
10366.8252, F.S.; providing for compliance with the Air
11Quality Improvement Act; providing a definition; requiring
12specified public utilities to submit a petition to the
13Public Service Commission for recovery of costs related to
14plans to achieve compliance; requiring the commission to
15establish regulatory conditions for approval of cost
16recovery; providing legislative findings that certain
17conditions imposed by the act are in the public interest;
18creating s. 403.0874, F.S.; creating the Air Quality
19Improvement Act; providing definitions; providing limits
20on emissions of nitrogen oxide and sulfur dioxide from
21certain electric generating units; requiring the
22department to expedite certain permits under certain
23circumstances; providing an effective date.
24
25     WHEREAS, the Legislature intends to encourage and promote
26the reduction of air emissions throughout the state, and
27     WHEREAS, in an attempt to improve the state's air quality,
28the Legislature wishes to provide incentives for and encourage
29innovative approaches to lowering emissions from existing
30generating facilities, NOW, THEREFORE,
31
32Be It Enacted by the Legislature of the State of Florida:
33
34     Section 1.  Paragraphs (c) and (d) of subsection (1) and
35subsection (2) of section 366.8255, Florida Statutes, are
36amended to read:
37     366.8255  Environmental cost recovery.--
38     (1)  As used in this section, the term:
39     (c)  "Environmental laws or regulations" includes all
40federal, state, or local statutes, administrative regulations,
41orders, ordinances, resolutions, or other requirements,
42including, but not limited to, voluntary agreements for air
43quality improvement programs entered into with the Florida
44Department of Environmental Protection prior to December 31,
452011, that apply to electric utilities and are designed to
46protect or improve the environment.
47     (d)  "Environmental compliance costs" includes all costs or
48expenses incurred by an electric utility in complying with
49environmental laws or regulations, including, but not limited
50to:
51     1.  Inservice capital investments, including the electric
52utility's last authorized rate of return on equity thereon.;
53     2.  Operation and maintenance expenses.;
54     3.  Fuel procurement costs.;
55     4.  Purchased power costs.;
56     5.  Emission allowance costs.;
57     6.  Direct taxes on environmental equipment.; and
58     7.  Costs or expenses prudently incurred by an electric
59utility pursuant to an agreement entered into on or after the
60effective date of this act and prior to October 1, 2002, between
61the electric utility and the Florida Department of Environmental
62Protection or the United States Environmental Protection Agency
63for the exclusive purpose of ensuring compliance with ozone
64ambient air quality standards by an electrical generating
65facility owned by the electric utility.
66     8.  Costs or expenses the commission determines are
67prudently incurred by an electric utility for the addition of
68air pollution control equipment for purposes of attaining or
69maintaining compliance status with ambient air quality standards
70or reducing emissions of hazardous air pollutants or visibility-
71impairing pollutants. In order to seek recovery of costs and
72expenses described in this subparagraph, an electric utility
73must enter into an agreement with the Florida Department of
74Environmental Protection prior to December 31, 2011, for the
75expeditious installation of this pollution control equipment.
76     (2)  An electric utility may submit to the commission a
77petition describing the utility's proposed environmental
78compliance activities and projected environmental compliance
79costs in addition to any Clean Air Act and Air Quality
80Improvement Act compliance activities and costs shown in a
81utility's filing under ss. s. 366.825 and 366.8252 and may
82include a proposal for nontraditional recovery of any such costs
83and the reasons supporting approval of the proposal. If
84approved, the commission shall allow recovery of the utility's
85prudently incurred environmental compliance costs, including the
86costs incurred in compliance with the Clean Air Act and the Air
87Quality Improvement Act, and any amendments thereto or any
88change in the application or enforcement thereof, through an
89environmental compliance cost-recovery factor that is separate
90and apart from the utility's base rates. An adjustment for the
91level of costs currently being recovered through base rates or
92other rate-adjustment clauses must be included in the filing.
93     Section 2.  Section 366.8252, Florida Statutes, is created
94to read:
95     366.8252  Air Quality Improvement Act compliance;
96definitions; plans; conditions.--
97     (1)  For the purposes of this section, the term "Air
98Quality Improvement Act" or "act" refers to s. 403.0874.
99     (2)  Each public utility subject to the air emission
100limitations of the Air Quality Improvement Act may petition the
101commission for approval to recover the costs of a plan to
102achieve compliance with the act. Such petition shall be filed
103with the commission on or before September 1 of the year prior
104to the calendar year for which requested cost recovery is to
105commence and shall include:
106     (a)  The number and identity of affected generating units.
107     (b)  A description of the compliance plan submitted by the
108public utility to the Department of Environmental Protection for
109certification pursuant to s. 403.0874(7).
110     (c)  The estimated effects of the compliance plan on the
111public utility's requirements for construction and operation of
112proposed or alternative generating facilities.
113     (d)  The public utility's proposed schedule for
114implementation of compliance activities.
115     (e)  The estimated costs, including capital investment and
116operating expenses, that the public utility will incur to
117implement its compliance plan.
118     (f)  A description of any changes in the public utility's
119future sources of fuel as a result of the compliance plan and
120the estimated effects of any such changes on the public
121utility's fuel costs.
122     (3)  The commission shall review the costs submitted
123pursuant to paragraph (2)(e) to determine whether such estimated
124costs are reasonable. If, after such review, the commission
125determines that the estimated costs of the public utility's plan
126are reasonable, it shall approve the costs for recovery from the
127utility's retail customers in accordance with the provisions of
128s. 366.8255, subject to the additional regulatory conditions
129provided in subsection (4). The commission shall render its
130decision on a plan filed by a public utility within 8 months
131after the date of filing. Notwithstanding the date of the
132commission's decision, recovery of the public utility's
133estimated costs shall be allowed commencing with the beginning
134of the calendar year requested in the utility's petition and
135shall be made subject to refund if the commission has not
136rendered its decision prior to such time. Approval by the
137commission shall establish that the public utility's estimated
138costs to implement the plan are recoverable, subject to true-up
139based on a subsequent determination of the utility's reasonable
140actual costs.
141     (4)  The commission shall establish the following
142regulatory conditions in conjunction with the approval of cost
143recovery for a public utility's compliance plan pursuant to
144subsection (3):
145     (a)  If requested by the public utility in its petition
146filed pursuant to subsection (2), the commission shall authorize
147recovery of the public utility's total costs to implement the
148compliance plan on a levelized basis over a period not to exceed
1497 years beginning with the year in which cost recovery
150commences. The public utility shall have the discretion in any
151year during such cost recovery period to increase or decrease
152such levelized recovery amount to the extent of any net over-
153recovery or under-recovery in the aggregate for its combined
154adjustment clauses, provided that the utility's estimated costs
155to implement the compliance plan are fully recovered by the
156conclusion of the cost recovery period. Any over-recovery or
157under-recovery of the public utility's actual costs to implement
158the compliance plan shall be trued up in the year following the
159conclusion of the cost recovery period. Costs to implement the
160compliance plan that are incurred beyond the recovery period
161shall be recovered through applicable adjustment clauses in
162accordance with the commission's normal practice and procedure.
163     (b)  If cost recovery is implemented pursuant to paragraph
164(a), the base rates and related rate schedules of the public
165utility in effect on the effective date of this section shall
166remain unchanged and frozen during the initial 5 years of the
167recovery period, the adjustment clause recovery factors of the
168public utility in effect on the effective date of this section
169shall remain unchanged and frozen during the recovery period,
170and the depreciation rates and any annual adjustments to
171depreciation expenses and reserves allowed in a rate settlement
172agreement approved by the commission for the public utility that
173are in effect on the effective date of this section shall remain
174in effect and capped during the recovery period, provided,
175however, that:
176     1.  The base rate freeze shall not apply during the initial
177fixed term of any such base rate settlement agreement. Beyond
178the initial fixed term, any such rate settlement agreement shall
179be deemed to be superseded and replaced by the provisions of
180this subsection. The public utility may elect to extend the base
181rate freeze for the full cost recovery period by written notice
182to the commission at least 3 months prior to the expiration of
183the initial 5-year rate freeze period.
184     2.  Any revenue-sharing mechanism contained in a base rate
185settlement agreement approved by the commission in lieu of rate
186of return regulation that is in effect on the effective date of
187this section shall be extended for the period of the base rate
188freeze and shall be the appropriate and exclusive mechanism to
189address earnings levels; provided, however, that:
190     a.  The revenue-sharing threshold for the year following
191the initial fixed term of the base rate settlement agreement
192shall be established by using actual calendar year 2003 gross
193retail base rate revenues increased annually for the
194intermediate years by the average annual growth rate in retail
195kilowatt hour sales for the 10-calendar-year period ending
196December 31, 2003. The revenue cap for the year following the
197initial fixed term of the base rate settlement agreement shall
198be established by adding to the aforementioned threshold the
199difference between the threshold and the cap amounts for 2003,
200increased annually for the intermediate years by the average
201growth rate in retail kilowatt hour sales for the 10-calendar-
202year period ending December 31, 2003. Thereafter, both the
203revenue-sharing threshold and the cap shall increase annually by
204the average annual growth rate in retail kilowatt hour sales for
205the 10-calendar-year period ending December 31, 2003.
206     b.  Incremental revenues attributable to a business
207combination or acquisition involving the public utility or to a
208change in rates pursuant to paragraph (d) shall be excluded in
209determining retail base rate revenues for purposes of revenue
210sharing.
211     c.  For purposes other than reporting or assessing
212earnings, such as cost recovery clauses and allowance for funds
213used during construction, the public utility shall have an
214authorized return-on-equity rate of 12 percent.
215     3.  The commission shall continue to review and approve the
216public utility's costs and programs subject to the adjustment
217clauses as it would in the absence of the adjustment clause
218freeze. During the adjustment clause freeze, the utility may
219allocate the total annual revenues from all adjustment clause
220cost recovery factors combined among the adjustment clauses in a
221manner that minimizes the year-end over-recovery or under-
222recovery balance in each individual clause. For any calendar
223year in which the net year-end over-recovery or under-recovery
224balance, after any discretionary adjustment to levelized
225compliance cost recovery pursuant to paragraph (a), for the
226utility's combined adjustment clauses in the aggregate is
227projected to exceed 10 percent of the total costs subject to the
228clauses, the commission shall make an adjustment to be
229implemented through a separate credit or charge on customer
230bills no later than the beginning of the following calendar
231year. Any year-end over-recovery or under-recovery balance in
232the utility's adjustment clauses for the final year of the cost
233recovery period shall be trued up in the following year in
234accordance with the commission's normal practice and procedure.
235     (c)  During the cost recovery period set forth in paragraph
236(a), the public utility shall be allowed to:
237     1.  Recover through the capacity cost recovery mechanism of
238the fuel and purchased power adjustment clause its annual
239revenue requirements associated with any generating unit subject
240to the Florida Electrical Power Plant Siting Act, ss. 403.501-
241403.518, that is placed in service by the public utility during
242such period.
243     2.  Suspend up to 100 percent of the annual accruals to its
244reserves for the dismantlement and decommissioning of generating
245facilities without limiting the utility's right to recover
246through future accruals or otherwise the reasonable and prudent
247costs of such dismantlement and decommissioning.
248     3.  Accelerate the amortization of regulatory assets
249previously approved by the commission.
250     (d)  Notwithstanding the foregoing base rate and adjustment
251clause freeze, the commission may take the following actions
252consistent with the public interest, which shall not be
253construed to impair the continued effectiveness of the
254regulatory conditions provided in this subsection:
255     1.  Allow adjustments to the rates, defer costs or
256revenues, or implement other remedial regulatory treatment of
257the public utility to take into account one or more of the
258following conditions occurring during the rate freeze period:
259     a.  Governmental action pursuant to any law, regulation,
260rule, or order that results in significant cost reductions or
261requires major expenditures. Such actions include, but are not
262limited to, a requirement for the utility to alter its
263structure, to divest itself of assets, to establish a regional
264transmission organization, or to install pollution control
265equipment solely for compliance purposes pursuant to a
266settlement agreement entered into with or approved by a
267government agency.
268     b.  Major expenditures to restore or replace property
269damaged or destroyed by force majeure, including, but not
270limited to, hurricanes, tropical storms, or tornadoes.
271     c.  The public utility's retail base rate earnings falling
272below a 10-percent return on equity as reported on a commission-
273adjusted or pro forma basis on a monthly earnings surveillance
274report. The public utility's achieved return on equity shall be
275calculated based upon an adjusted equity ratio to the extent
276provided for in the public utility's last base rate settlement
277agreement approved by the commission.
278     d.  Changes in accounting requirements that substantially
279affect the utility's recognition of revenues and expenses.
280     2.  Approve any reduction in base rates or base rate
281charges requested by the public utility or approve any new or
282revised tariff provisions or rate schedules requested by the
283utility, provided that such tariff request does not increase any
284existing base rate component of a tariff or rate schedule during
285the period the base rate freeze is in effect unless the
286application of such new or revised tariff or rate schedule is
287optional to the utility's customers.
288     (e)  The Legislature finds that the regulatory conditions
289established by this subsection provide the necessary and
290appropriate recognition of the obligations imposed on a public
291utility by the Air Quality Improvement Act and that such
292conditions are therefore in the public interest. Notwithstanding
293the other provisions of this subsection, in the event
294circumstances arise which demonstrate that there will be a
295substantial harm to the public interest, the commission may take
296such action otherwise within its jurisdiction as it finds
297necessary to prevent or mitigate such harm.
298     Section 3.  Section 403.0874, Florida Statutes, is created
299to read:
300     403.0874  Emissions of nitrogen oxide, sulfur dioxide, and
301particulate matter from certain electric generating units.--
302     (1)  This section shall be known by the popular name the
303"Air Quality Improvement Act."
304     (2)  As used in this section:
305     (a)  "Electric utility steam generating unit" means an
306electric utility steam generating unit that has more than 100
307megawatts of potential electric output capacity and supplies
308more than one-third of such capacity to any utility power
309distribution system for sale.
310     (b)  "Investor-owned public utility" means a public
311utility, as defined in s. 366.02, that supplies electricity to
312or for the public in this state.
313     (3)  An investor-owned public utility that on the effective
314date of this act owns or operates coal-fired electric utility
315steam generating units for which the collective emissions of
316nitrogen oxide from all such coal-fired generating units were
317between 32,000 tons and 36,000 tons in calendar year 2002, as
318reported in the United States Environmental Protection Agency
319clean air markets program database, shall not collectively emit
320from all such coal-fired generating units more than 17,000 tons
321of nitrogen oxide in calendar year 2010 or any calendar year
322thereafter.
323     (4)  An investor-owned public utility that on the effective
324date of this act owns or operates coal-fired electric utility
325steam generating units for which the collective emissions of
326sulfur dioxide from all such coal-fired generating units were
327between 96,000 tons and 100,000 tons in calendar year 2002, as
328reported in the United States Environmental Protection Agency
329clean air markets program database, shall not collectively emit
330from all such coal-fired generating units more than 50,000 tons
331of sulfur dioxide in calendar year 2010 or any calendar year
332thereafter.
333     (5)  An investor-owned public utility that on the effective
334date of this act owns or operates residual oil and natural gas-
335fired or residual oil-fired electric utility steam generating
336units for which the collective emissions of nitrogen oxide from
337all such oil and gas-fired or oil-fired generating units
338exceeded 11,000 tons in calendar year 2002, as reported in the
339United States Environmental Protection Agency clean air markets
340program database, shall not collectively emit from all such oil
341and gas-fired or oil-fired generating units more than an annual
342weighted average of 0.26 pounds of nitrogen oxide per million
343BTUs of fuel consumed in calendar year 2010 or any calendar year
344thereafter.
345     (6)  An investor-owned public utility that on the effective
346date of this act owns or operates residual oil and natural gas-
347fired or residual oil-fired electric utility steam generating
348units for which the collective emissions of particulates from
349all such oil and gas-fired or oil-fired generating units
350exceeded 7,000 tons in calendar year 2002, as reported in the
351Annual Operating Reports of the investor-owned public utility
352filed under Title V of the Clean Air Act, shall not collectively
353emit from all such oil and gas-fired or oil-fired generating
354units more than an annual weighted average of 0.030 pounds per
355million BTUs of fuel consumed in calendar year 2012 or any
356calendar year thereafter.
357     (7)  An investor-owned public utility to which this section
358applies may determine how it will achieve compliance with the
359collective air emissions limitations imposed by this section and
360shall submit its compliance plan to the Department of
361Environmental Protection no later than August 1 of the year this
362section becomes effective. Within 30 days after such compliance
363plan or any subsequent revised compliance plan is submitted, the
364department shall certify whether the compliance plan or revised
365compliance plan is capable of achieving the emissions
366limitations required under this section. Compliance with the air
367emissions limitations set out in this section does not alter any
368obligation to comply with any other federal or state law,
369regulation, or rule related to air quality or visibility.
370     (8)  The electric utility steam generating units that are
371subject to the collective air emissions limitations set out in
372this section on the effective date of this act shall remain
373subject to the collective air emissions limitations regardless
374of whether each individual generating unit thereafter continues
375to be owned or operated by an investor-owned public utility.
376     (9)  The Department of Environmental Protection shall
377expedite the issuance of any permit or modified permit to an
378investor-owned public utility for electric utility steam
379generating units subject to this section and shall include
380conditions that provide for compliance with the requirements of
381this section by incorporating the emissions limitations
382contained herein and requiring testing, monitoring,
383recordkeeping, and reporting adequate to ensure compliance
384therewith.
385     Section 4.  This act shall take effect upon becoming a law.


CODING: Words stricken are deletions; words underlined are additions.