Senate Bill sb2798
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Florida Senate - 2004 SB 2798
By Senator Argenziano
3-1623B-04 See HB 1631
1 A bill to be entitled
2 An act relating to air quality; amending s.
3 366.8255, F.S.; redefining the term
4 "environmental laws or regulations" to include
5 certain agreements entered into by electric
6 utilities with the Department of Environmental
7 Protection; redefining the term "environmental
8 compliance costs" to include costs related to
9 certain air pollution control equipment;
10 providing for cost recovery by electric
11 utilities under certain circumstances; creating
12 s. 366.8252, F.S.; providing for compliance
13 with the Air Quality Improvement Act; providing
14 a definition; requiring specified public
15 utilities to submit a petition to the Public
16 Service Commission for recovery of costs
17 related to plans to achieve compliance;
18 requiring the commission to establish
19 regulatory conditions for approval of cost
20 recovery; providing legislative findings that
21 certain conditions imposed by the act are in
22 the public interest; creating s. 403.0874,
23 F.S.; creating the Air Quality Improvement Act;
24 providing definitions; providing limits on
25 emissions of nitrogen oxide and sulfur dioxide
26 from certain electric generating units;
27 requiring the department to expedite certain
28 permits under certain circumstances; providing
29 an effective date.
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Florida Senate - 2004 SB 2798
3-1623B-04 See HB 1631
1 WHEREAS, the Legislature intends to encourage and
2 promote the reduction of air emissions throughout the state,
3 and
4 WHEREAS, in an attempt to improve the state's air
5 quality, the Legislature wishes to provide incentives for and
6 encourage innovative approaches to lowering emissions from
7 existing generating facilities, NOW, THEREFORE,
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9 Be It Enacted by the Legislature of the State of Florida:
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11 Section 1. Paragraphs (c) and (d) of subsection (1)
12 and subsection (2) of section 366.8255, Florida Statutes, are
13 amended to read:
14 366.8255 Environmental cost recovery.--
15 (1) As used in this section, the term:
16 (c) "Environmental laws or regulations" includes all
17 federal, state, or local statutes, administrative regulations,
18 orders, ordinances, resolutions, or other requirements,
19 including, but not limited to, voluntary agreements for air
20 quality improvement programs entered into with the Florida
21 Department of Environmental Protection prior to December 31,
22 2011, that apply to electric utilities and are designed to
23 protect or improve the environment.
24 (d) "Environmental compliance costs" includes all
25 costs or expenses incurred by an electric utility in complying
26 with environmental laws or regulations, including, but not
27 limited to:
28 1. Inservice capital investments, including the
29 electric utility's last authorized rate of return on equity
30 thereon.;
31 2. Operation and maintenance expenses.;
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Florida Senate - 2004 SB 2798
3-1623B-04 See HB 1631
1 3. Fuel procurement costs.;
2 4. Purchased power costs.;
3 5. Emission allowance costs.;
4 6. Direct taxes on environmental equipment. ; and
5 7. Costs or expenses prudently incurred by an electric
6 utility pursuant to an agreement entered into on or after the
7 effective date of this act and prior to October 1, 2002,
8 between the electric utility and the Florida Department of
9 Environmental Protection or the United States Environmental
10 Protection Agency for the exclusive purpose of ensuring
11 compliance with ozone ambient air quality standards by an
12 electrical generating facility owned by the electric utility.
13 8. Costs or expenses the commission determines are
14 prudently incurred by an electric utility for the addition of
15 air pollution control equipment for purposes of attaining or
16 maintaining compliance status with ambient air quality
17 standards or reducing emissions of hazardous air pollutants or
18 visibility-impairing pollutants. In order to seek recovery of
19 costs and expenses described in this subparagraph, an electric
20 utility must enter into an agreement with the Florida
21 Department of Environmental Protection prior to December 31,
22 2011, for the expeditious installation of this pollution
23 control equipment.
24 (2) An electric utility may submit to the commission a
25 petition describing the utility's proposed environmental
26 compliance activities and projected environmental compliance
27 costs in addition to any Clean Air Act and Air Quality
28 Improvement Act compliance activities and costs shown in a
29 utility's filing under ss. s. 366.825 and 366.8252 and may
30 include a proposal for nontraditional recovery of any such
31 costs and the reasons supporting approval of the proposal. If
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Florida Senate - 2004 SB 2798
3-1623B-04 See HB 1631
1 approved, the commission shall allow recovery of the utility's
2 prudently incurred environmental compliance costs, including
3 the costs incurred in compliance with the Clean Air Act and
4 the Air Quality Improvement Act, and any amendments thereto or
5 any change in the application or enforcement thereof, through
6 an environmental compliance cost-recovery factor that is
7 separate and apart from the utility's base rates. An
8 adjustment for the level of costs currently being recovered
9 through base rates or other rate-adjustment clauses must be
10 included in the filing.
11 Section 2. Section 366.8252, Florida Statutes, is
12 created to read:
13 366.8252 Air Quality Improvement Act compliance;
14 definitions; plans; conditions.--
15 (1) For the purposes of this section, the term " Air
16 Quality Improvement Act" or "act" refers to s. 403.0874.
17 (2) Each public utility subject to the air emission
18 limitations of the Air Quality Improvement Act may petition
19 the commission for approval to recover the costs of a plan to
20 achieve compliance with the act. Such petition shall be filed
21 with the commission on or before September 1 of the year prior
22 to the calendar year for which requested cost recovery is to
23 commence and shall include:
24 (a) The number and identity of affected generating
25 units.
26 (b) A description of the compliance plan submitted by
27 the public utility to the Department of Environmental
28 Protection for certification pursuant to s. 403.0874(7).
29 (c) The estimated effects of the compliance plan on
30 the public utility's requirements for construction and
31 operation of proposed or alternative generating facilities.
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Florida Senate - 2004 SB 2798
3-1623B-04 See HB 1631
1 (d) The public utility's proposed schedule for
2 implementation of compliance activities.
3 (e) The estimated costs, including capital investment
4 and operating expenses, that the public utility will incur to
5 implement its compliance plan.
6 (f) A description of any changes in the public
7 utility's future sources of fuel as a result of the compliance
8 plan and the estimated effects of any such changes on the
9 public utility's fuel costs.
10 (3) The commission shall review the costs submitted
11 pursuant to paragraph (2)(e) to determine whether such
12 estimated costs are reasonable. If, after such review, the
13 commission determines that the estimated costs of the public
14 utility's plan are reasonable, it shall approve the costs for
15 recovery from the utility's retail customers in accordance
16 with the provisions of s. 366.8255, subject to the additional
17 regulatory conditions provided in subsection (4). The
18 commission shall render its decision on a plan filed by a
19 public utility within 8 months after the date of filing.
20 Notwithstanding the date of the commission's decision,
21 recovery of the public utility's estimated costs shall be
22 allowed commencing with the beginning of the calendar year
23 requested in the utility's petition and shall be made subject
24 to refund if the commission has not rendered its decision
25 prior to such time. Approval by the commission shall establish
26 that the public utility's estimated costs to implement the
27 plan are recoverable, subject to true-up based on a subsequent
28 determination of the utility's reasonable actual costs.
29 (4) The commission shall establish the following
30 regulatory conditions in conjunction with the approval of cost
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Florida Senate - 2004 SB 2798
3-1623B-04 See HB 1631
1 recovery for a public utility's compliance plan pursuant to
2 subsection (3):
3 (a) If requested by the public utility in its petition
4 filed pursuant to subsection (2), the commission shall
5 authorize recovery of the public utility's total costs to
6 implement the compliance plan on a levelized basis over a
7 period not to exceed 7 years beginning with the year in which
8 cost recovery commences. The public utility shall have the
9 discretion in any year during such cost recovery period to
10 increase or decrease such levelized recovery amount to the
11 extent of any net over-recovery or under-recovery in the
12 aggregate for its combined adjustment clauses, provided that
13 the utility's estimated costs to implement the compliance plan
14 are fully recovered by the conclusion of the cost recovery
15 period. Any over-recovery or under-recovery of the public
16 utility's actual costs to implement the compliance plan shall
17 be trued up in the year following the conclusion of the cost
18 recovery period. Costs to implement the compliance plan that
19 are incurred beyond the recovery period shall be recovered
20 through applicable adjustment clauses in accordance with the
21 commission's normal practice and procedure.
22 (b) If cost recovery is implemented pursuant to
23 paragraph (a), the base rates and related rate schedules of
24 the public utility in effect on the effective date of this
25 section shall remain unchanged and frozen during the initial 5
26 years of the recovery period, the adjustment clause recovery
27 factors of the public utility in effect on the effective date
28 of this section shall remain unchanged and frozen during the
29 recovery period, and the depreciation rates and any annual
30 adjustments to depreciation expenses and reserves allowed in a
31 rate settlement agreement approved by the commission for the
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Florida Senate - 2004 SB 2798
3-1623B-04 See HB 1631
1 public utility that are in effect on the effective date of
2 this section shall remain in effect and capped during the
3 recovery period, provided, however, that:
4 1. The base rate freeze shall not apply during the
5 initial fixed term of any such base rate settlement agreement.
6 Beyond the initial fixed term, any such rate settlement
7 agreement shall be deemed to be superseded and replaced by the
8 provisions of this subsection. The public utility may elect to
9 extend the base rate freeze for the full cost recovery period
10 by written notice to the commission at least 3 months prior to
11 the expiration of the initial 5-year rate freeze period.
12 2. Any revenue-sharing mechanism contained in a base
13 rate settlement agreement approved by the commission in lieu
14 of rate of return regulation that is in effect on the
15 effective date of this section shall be extended for the
16 period of the base rate freeze and shall be the appropriate
17 and exclusive mechanism to address earnings levels; provided,
18 however, that:
19 a. The revenue-sharing threshold for the year
20 following the initial fixed term of the base rate settlement
21 agreement shall be established by using actual calendar year
22 2003 gross retail base rate revenues increased annually for
23 the intermediate years by the average annual growth rate in
24 retail kilowatt hour sales for the 10-calendar-year period
25 ending December 31, 2003. The revenue cap for the year
26 following the initial fixed term of the base rate settlement
27 agreement shall be established by adding to the aforementioned
28 threshold the difference between the threshold and the cap
29 amounts for 2003, increased annually for the intermediate
30 years by the average growth rate in retail kilowatt hour sales
31 for the 10-calendar-year period ending December 31, 2003.
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Florida Senate - 2004 SB 2798
3-1623B-04 See HB 1631
1 Thereafter, both the revenue-sharing threshold and the cap
2 shall increase annually by the average annual growth rate in
3 retail kilowatt hour sales for the 10-calendar-year period
4 ending December 31, 2003.
5 b. Incremental revenues attributable to a business
6 combination or acquisition involving the public utility or to
7 a change in rates pursuant to paragraph (d) shall be excluded
8 in determining retail base rate revenues for purposes of
9 revenue sharing.
10 c. For purposes other than reporting or assessing
11 earnings, such as cost recovery clauses and allowance for
12 funds used during construction, the public utility shall have
13 an authorized return-on-equity rate of 12 percent.
14 3. The commission shall continue to review and approve
15 the public utility's costs and programs subject to the
16 adjustment clauses as it would in the absence of the
17 adjustment clause freeze. During the adjustment clause freeze,
18 the utility may allocate the total annual revenues from all
19 adjustment clause cost recovery factors combined among the
20 adjustment clauses in a manner that minimizes the year-end
21 over-recovery or under-recovery balance in each individual
22 clause. For any calendar year in which the net year-end
23 over-recovery or under-recovery balance, after any
24 discretionary adjustment to levelized compliance cost recovery
25 pursuant to paragraph (a), for the utility's combined
26 adjustment clauses in the aggregate is projected to exceed 10
27 percent of the total costs subject to the clauses, the
28 commission shall make an adjustment to be implemented through
29 a separate credit or charge on customer bills no later than
30 the beginning of the following calendar year. Any year-end
31 over-recovery or under-recovery balance in the utility's
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Florida Senate - 2004 SB 2798
3-1623B-04 See HB 1631
1 adjustment clauses for the final year of the cost recovery
2 period shall be trued up in the following year in accordance
3 with the commission's normal practice and procedure.
4 (c) During the cost recovery period set forth in
5 paragraph (a), the public utility shall be allowed to:
6 1. Recover through the capacity cost recovery
7 mechanism of the fuel and purchased power adjustment clause
8 its annual revenue requirements associated with any generating
9 unit subject to the Florida Electrical Power Plant Siting Act,
10 ss. 403.501-403.518, that is placed in service by the public
11 utility during such period.
12 2. Suspend up to 100 percent of the annual accruals to
13 its reserves for the dismantlement and decommissioning of
14 generating facilities without limiting the utility's right to
15 recover through future accruals or otherwise the reasonable
16 and prudent costs of such dismantlement and decommissioning.
17 3. Accelerate the amortization of regulatory assets
18 previously approved by the commission.
19 (d) Notwithstanding the foregoing base rate and
20 adjustment clause freeze, the commission may take the
21 following actions consistent with the public interest, which
22 shall not be construed to impair the continued effectiveness
23 of the regulatory conditions provided in this subsection:
24 1. Allow adjustments to the rates, defer costs or
25 revenues, or implement other remedial regulatory treatment of
26 the public utility to take into account one or more of the
27 following conditions occurring during the rate freeze period:
28 a. Governmental action pursuant to any law,
29 regulation, rule, or order that results in significant cost
30 reductions or requires major expenditures. Such actions
31 include, but are not limited to, a requirement for the utility
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Florida Senate - 2004 SB 2798
3-1623B-04 See HB 1631
1 to alter its structure, to divest itself of assets, to
2 establish a regional transmission organization, or to install
3 pollution control equipment solely for compliance purposes
4 pursuant to a settlement agreement entered into with or
5 approved by a government agency.
6 b. Major expenditures to restore or replace property
7 damaged or destroyed by force majeure, including, but not
8 limited to, hurricanes, tropical storms, or tornadoes.
9 c. The public utility's retail base rate earnings
10 falling below a 10-percent return on equity as reported on a
11 commission-adjusted or pro forma basis on a monthly earnings
12 surveillance report. The public utility's achieved return on
13 equity shall be calculated based upon an adjusted equity ratio
14 to the extent provided for in the public utility's last base
15 rate settlement agreement approved by the commission.
16 d. Changes in accounting requirements that
17 substantially affect the utility's recognition of revenues and
18 expenses.
19 2. Approve any reduction in base rates or base rate
20 charges requested by the public utility or approve any new or
21 revised tariff provisions or rate schedules requested by the
22 utility, provided that such tariff request does not increase
23 any existing base rate component of a tariff or rate schedule
24 during the period the base rate freeze is in effect unless the
25 application of such new or revised tariff or rate schedule is
26 optional to the utility's customers.
27 (e) The Legislature finds that the regulatory
28 conditions established by this subsection provide the
29 necessary and appropriate recognition of the obligations
30 imposed on a public utility by the Air Quality Improvement Act
31 and that such conditions are therefore in the public interest.
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Florida Senate - 2004 SB 2798
3-1623B-04 See HB 1631
1 Notwithstanding the other provisions of this subsection, in
2 the event circumstances arise which demonstrate that there
3 will be a substantial harm to the public interest, the
4 commission may take such action otherwise within its
5 jurisdiction as it finds necessary to prevent or mitigate such
6 harm.
7 Section 3. Section 403.0874, Florida Statutes, is
8 created to read:
9 403.0874 Emissions of nitrogen oxide, sulfur dioxide,
10 and particulate matter from certain electric generating
11 units.--
12 (1) This section shall be known by the popular name
13 the "Air Quality Improvement Act."
14 (2) As used in this section:
15 (a) "Electric utility steam generating unit" means an
16 electric utility steam generating unit that has more than 100
17 megawatts of potential electric output capacity and supplies
18 more than one-third of such capacity to any utility power
19 distribution system for sale.
20 (b) "Investor-owned public utility" means a public
21 utility, as defined in s. 366.02, that supplies electricity to
22 or for the public in this state.
23 (3) An investor-owned public utility that on the
24 effective date of this act owns or operates coal-fired
25 electric utility steam generating units for which the
26 collective emissions of nitrogen oxide from all such
27 coal-fired generating units were between 32,000 tons and
28 36,000 tons in calendar year 2002, as reported in the United
29 States Environmental Protection Agency clean air markets
30 program database, shall not collectively emit from all such
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Florida Senate - 2004 SB 2798
3-1623B-04 See HB 1631
1 coal-fired generating units more than 17,000 tons of nitrogen
2 oxide in calendar year 2010 or any calendar year thereafter.
3 (4) An investor-owned public utility that on the
4 effective date of this act owns or operates coal-fired
5 electric utility steam generating units for which the
6 collective emissions of sulfur dioxide from all such
7 coal-fired generating units were between 96,000 tons and
8 100,000 tons in calendar year 2002, as reported in the United
9 States Environmental Protection Agency clean air markets
10 program database, shall not collectively emit from all such
11 coal-fired generating units more than 50,000 tons of sulfur
12 dioxide in calendar year 2010 or any calendar year thereafter.
13 (5) An investor-owned public utility that on the
14 effective date of this act owns or operates residual oil and
15 natural gas-fired or residual oil-fired electric utility steam
16 generating units for which the collective emissions of
17 nitrogen oxide from all such oil and gas-fired or oil-fired
18 generating units exceeded 11,000 tons in calendar year 2002,
19 as reported in the United States Environmental Protection
20 Agency clean air markets program database, shall not
21 collectively emit from all such oil and gas-fired or oil-fired
22 generating units more than an annual weighted average of 0.26
23 pounds of nitrogen oxide per million BTUs of fuel consumed in
24 calendar year 2010 or any calendar year thereafter.
25 (6) An investor-owned public utility that on the
26 effective date of this act owns or operates residual oil and
27 natural gas-fired or residual oil-fired electric utility steam
28 generating units for which the collective emissions of
29 particulates from all such oil and gas-fired or oil-fired
30 generating units exceeded 7,000 tons in calendar year 2002, as
31 reported in the Annual Operating Reports of the investor-owned
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Florida Senate - 2004 SB 2798
3-1623B-04 See HB 1631
1 public utility filed under Title V of the Clean Air Act, shall
2 not collectively emit from all such oil and gas-fired or
3 oil-fired generating units more than an annual weighted
4 average of 0.030 pounds per million BTUs of fuel consumed in
5 calendar year 2012 or any calendar year thereafter.
6 (7) An investor-owned public utility to which this
7 section applies may determine how it will achieve compliance
8 with the collective air emissions limitations imposed by this
9 section and shall submit its compliance plan to the Department
10 of Environmental Protection no later than August 1 of the year
11 this section becomes effective. Within 30 days after such
12 compliance plan or any subsequent revised compliance plan is
13 submitted, the department shall certify whether the compliance
14 plan or revised compliance plan is capable of achieving the
15 emissions limitations required under this section. Compliance
16 with the air emissions limitations set out in this section
17 does not alter any obligation to comply with any other federal
18 or state law, regulation, or rule related to air quality or
19 visibility.
20 (8) The electric utility steam generating units that
21 are subject to the collective air emissions limitations set
22 out in this section on the effective date of this act shall
23 remain subject to the collective air emissions limitations
24 regardless of whether each individual generating unit
25 thereafter continues to be owned or operated by an
26 investor-owned public utility.
27 (9) The Department of Environmental Protection shall
28 expedite the issuance of any permit or modified permit to an
29 investor-owned public utility for electric utility steam
30 generating units subject to this section and shall include
31 conditions that provide for compliance with the requirements
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Florida Senate - 2004 SB 2798
3-1623B-04 See HB 1631
1 of this section by incorporating the emissions limitations
2 contained herein and requiring testing, monitoring,
3 recordkeeping, and reporting adequate to ensure compliance
4 therewith.
5 Section 4. This act shall take effect upon becoming a
6 law.
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