FILED AUG 23, 2016 DOCUMENT NO. 06941-16 FPSC - COMMISSION CLERK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 BEFORE THE FLORIDA PUBLIC SERVICE COMMISSION In the Matter of: PETITION FOR RATE INCREASE BY FLORIDA POWER & LIGHT COMPANY. ______________________________/ PETITION FOR APPROVAL OF 2016-2018 STORM HARDENING PLAN BY FLORIDA POWER & LIGHT COMPANY. ____________________________/ 2016 DEPRECIATION AND DISMANTLEMENT STUDY BY, FLORIDA POWER & LIGHT COMPANY. ____________________________/ PETITION FOR LIMITED PROCEEDING TO MODIFY AND CONTINUE INCENTIVE MECHANISM, BY FLORIDA POWER & LIGHT COMPANY. ____________________________/ DOCKET NO. 160021-EI DOCKET NO. 160061-EI DOCKET NO. 160062-EI DOCKET NO. 160088-EI 16 VOLUME 1 17 (Pages 1 through 171) 18 PROCEEDINGS: 19 COMMISSIONERS PARTICIPATING: 20 21 22 23 24 000001 HEARING CHAIRMAN JULIE I. BROWN COMMISSIONER LISA POLAK EDGAR COMMISSIONER ART GRAHAM COMMISSIONER RONALD A. BRISÉ COMMISSIONER JIMMY PATRONIS DATE: Monday, August 22, 2016 TIME: Commenced at 9:30 a.m. Concluded at 12:20 p.m. 25 FLORIDA PUBLIC SERVICE COMMISSION 1 PLACE: Betty Easley Conference Center Room 148 4075 Esplanade Way Tallahassee, Florida REPORTED BY: LINDA BOLES, CRR, RPR Official FPSC Reporter (850) 413-6734 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 FLORIDA PUBLIC SERVICE COMMISSION 000002 1 APPEARANCES: 2 000003 JOHN T. BUTLER, R. WADE LITCHFIELD, KEVIN I.C. 3 DONALDSON, KEN RUBIN, and MARIA MONCADA, ESQUIRES, 4 700 Universe Boulevard, Juno Beach, Florida 33408-0420; 5 SUSAN F. CLARK, ESQUIRE, 301 South Bronough Street, 6 Suite 200, Tallahassee, Florida 32301; and 7 CHARLES A. GUYTON, ESQUIRE, 215 South Monroe Street, 8 Suite 601, Tallahassee, Florida 32301, appearing on 9 behalf of Florida Power & Light Company. J.R. KELLY, PUBLIC COUNSEL; CHARLES REHWINKEL, 10 11 ERIK L. SAYLER; and PATRICIA A. CHRISTENSEN, ESQUIRES, 12 Office of Public Counsel, c/o the Florida Legislature, 13 111 W. Madison Street, Room 812, Tallahassee, Florida 14 32399-1400, appearing on behalf of the Citizens of the 15 State of Florida. ROBERT SCHEFFEL WRIGHT and JOHN T. LaVIA, III, 16 17 ESQUIRES, Gardner Law Firm, 1300 Thomaswood Drive, 18 Tallahassee, Florida 32308, appearing on behalf of the 19 Florida Retail Federation. JOHN B. COFFMAN, ESQUIRE, John B. Coffman, 20 21 LLC, 871 Tuxedo Boulevard, St. Louis, Montana, 22 63119-2044; and JACK MCRAY, 200 West College Avenue, 23 #304, Tallahassee, Florida, 32301, appearing on behalf 24 of AARP. 25 FLORIDA PUBLIC SERVICE COMMISSION 1 APPEARANCES (Continued): 2 000004 JON C. MOYLE, JR., and KAREN PUTNAL, ESQUIRES, 3 Moyle Law Firm, P.A., 118 North Gadsden Street, 4 Tallahassee, Florida 32301, appearing on behalf of 5 Florida Industrial Power Users Group. 6 DIANA CSANK, ESQUIRE, 50 F Street, NW, 8th 7 Floor, Washington, DC 20001, appearing on behalf of 8 Sierra Club. KENNETH L. WISEMAN, MARK F. SUNDBACK, WILLIAM 9 10 M. RAPPOLT, and KEVIN C. SIQVELAND, ESQUIRES, Andrews 11 Kurth, LLP, 1350 I Street NW, Suite 1100, Washington, DC 12 20005, appearing on behalf of South Florida Hospital and 13 Healthcare Association. STEPHANIE U. ROBERTS, 110 Oakwood Drive, Suite 14 15 500, Winston-Salem, North Carolina 27103; and DERRICK 16 PRINCE WILLIAMSON, ESQUIRE, 1100 Bent Creek Boulevard, 17 Suite 101, appearing on behalf of Wal-Mart Stores East, 18 LP, and Sam's East, Inc. THOMAS A. JERNIGAN, CAPTAIN NATALIE A. CEPAK 19 20 and CAPTAIN LANNY ZIEMAN, ESQUIRES, USAF Utility Law 21 Field Support Center, Air Force Legal Operations Agency, 22 139 Barnes Drive, Suite 1, Tyndall Air Force Base, 23 Florida 32403, appearing on behalf of Federal Executive 24 Agencies. 25 FLORIDA PUBLIC SERVICE COMMISSION 1 APPEARANCES (Continued): NATHAN A. SKOP, ESQUIRE, 420 NW 50th 2 3 Boulevard, Gainesville, Florida 32607, appearing on 4 behalf of Mr. Daniel R. Larson and Mrs. Alexandria 5 Larson. 6 000005 SUZANNE BROWNLESS, KYESHA MAPP, ADRIA HARPER, 7 DANIJELA JANJIC, and MARGO LEATHERS, ESQUIRES, General 8 Counsel's Office, 2540 Shumard Oak Boulevard, 9 Tallahassee, Florida 32399-0850, appearing on behalf of 10 the staff of the Florida Public Service Commission. 11 APPEARANCES: 12 KEITH HETRICK, ESQUIRE, General Counsel, and 13 MARY ANNE HELTON, ESQUIRE, FPSC General Counsel's 14 Office, 2540 Shumard Oak Boulevard, Tallahassee, Florida 15 32399-0850, appearing as advisors to the Florida Public 16 Service Commission. 17 18 19 20 21 22 23 24 25 FLORIDA PUBLIC SERVICE COMMISSION 1 I N D E X 2 WITNESSES 3 NAME: 4 ERIC SILAGY 5 Examination by Mr. Litchfield Prefiled Direct Testimony Inserted Examination by Ms. Christensen Examination by Mr. Moyle 6 7 000006 PAGE NO. 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 FLORIDA PUBLIC SERVICE COMMISSION 109 111 145 149 1 000007 EXHIBITS 2 NUMBER: ID. 3 1 Comprehensive Exhibit List 50 4 50 5 2 through 396 (As identified on Comprehensive Exhibit List) 6 397 (As identified on Comprehensive Exhibit List) 49 398 through 558 (As identified on Comprehensive Exhibit List) 50 7 8 9 559 Aviation Assets 157 560 2016 Registered Lobbyist for FPL 157 561 Percent Increase by Rate Class Sought by FPL for 2017 and 2018 157 13 562 Customer Changes 8-15 to 2-16 157 14 563 Consent Order - Cooling Canals 157 15 564 2017 FPL Rate Increase 157 16 565 Miami-Dade County case 157 17 566 ROE Adder Affecting Performance 157 10 11 12 18 19 20 21 22 23 24 25 FLORIDA PUBLIC SERVICE COMMISSION ADMTD. 50 49 000008 1 P R O C E E D I N G S 2 CHAIRMAN BROWN: Today is August 22nd, 2016. 3 This is the FPL rate case, and I'd like to call this 4 hearing to order. 5 Staff, will you please read the notice. 6 MS. BROWNLESS: By notice issued on July 15th, 7 2016, by the Commission Clerk, this time and place has 8 been set for a hearing in Docket Nos. 160021-EI, 9 160061-EI, 160062-EI, and 160088-EI, a petition for 10 increase in rates by Florida Power & Light Company, a 11 petition for approval of the 2016 to 2018 storm 12 hardening plan by Florida Power & Light Company, 2016 13 depreciation and dismantlement study by Florida Power & 14 Light Company, and petition for limited proceeding to 15 modify and continue incentive mechanism by Florida Power 16 & Light Company. 17 CHAIRMAN BROWN: Thank you very much. And at 18 this time, we'll take appearances starting with on my 19 left. 20 21 22 MR. LITCHFIELD: Wade Litchfield from Florida Power & Light Company. MR. BUTLER: John Butler for Florida Power & 23 Light Company. Also enter an appearance for Maria 24 Moncada, Kevin Donaldson, Ken Rubin; Susan Clark of the 25 Radey law firm; and Charles Guyton of the Gunster law FLORIDA PUBLIC SERVICE COMMISSION 1 firm. 000009 Thank you. 2 MR. MOYLE: Good morning. I'm Jon Moyle with 3 the Moyle Law Firm representing the Florida Industrial 4 Power Users Group. 5 And Karen Putnal of our firm should also be reflected as 6 appearing on behalf of FIPUG. They're commonly known as FIPUG. 7 CHAIRMAN BROWN: 8 MR. WISEMAN: 9 Thank you. Good morning. Ken Wiseman from Andrews Kurth for South Florida Hospital and Healthcare 10 Association. And I'd also like to enter the appearances 11 of Mark Sundback, Bill Rappolt, and Kevin Siqveland, all 12 of Andrews Kurth. 13 CHAIRMAN BROWN: 14 MR. JERNIGAN: Thank you. Good morning. Thomas Jernigan 15 for the Federal Executive Agencies. 16 have Captain Cepak, Captain Natalie Cepak, and Captain 17 Lanny Zieman. 18 19 Thank you. CHAIRMAN BROWN: MR. JERNIGAN: Zieman. CHAIRMAN BROWN: 23 MS. CSANK: 25 Could you state Lanny Zieman, Captain Lanny 22 24 I'm sorry. the last party? 20 21 Along with me I Okay. Good morning. Diana Csank with the Sierra Club. CHAIRMAN BROWN: Thank you. FLORIDA PUBLIC SERVICE COMMISSION 1 2 MR. SKOP: Good morning. 000010 Nathan Skop appearing on behalf of Daniel and Alexandria Larson. 3 CHAIRMAN BROWN: 4 MR. WRIGHT: Thank you. Good morning, Commissioners. 5 Robert Scheffel Wright of the law firm Gardner, Bist, 6 Bowden, Bush, Dee, LaVia & Wright, appearing on behalf 7 of the Florida Retail Federation. 8 enter an appearance for my law partner John T. "Jay" 9 LaVia, III. I'd also like to Thank you. 10 CHAIRMAN BROWN: 11 MR. COFFMAN: Thank you. May it please the Commission, I 12 am John B. Coffman, appearing on behalf of AARP. 13 appearing today is Jack McRay. Also 14 CHAIRMAN BROWN: Thank you. 15 MR. REHWINKEL: Good morning. 16 Rehwinkel, Deputy Public Counsel. 17 enter an appearance for J. R. Kelly, Public Counsel, 18 Patty Christensen, and Erik Sayler of the Office of 19 Public Counsel, appearing on behalf of the citizens of 20 Florida. Charles I would also like to 21 CHAIRMAN BROWN: Thank you. 22 MS. BROWNLESS: Good morning. 23 Brownless. 24 staff. 25 Mapp, Margo Leathers, and Adria Harper. Suzanne I'm appearing on behalf of the Commission And with me will be Danijela Janjic, Kyesha FLORIDA PUBLIC SERVICE COMMISSION 1 CHAIRMAN BROWN: 2 MS. HELTON: 000011 Thank you. And good morning. I'm Mary Anne I'm here as your advisor today. I'd also like 3 Helton. 4 to make an appearance for your General Counsel, Keith 5 Hetrick Hetrick. 6 CHAIRMAN BROWN: Thank you. And it's great to 7 have you all here today, and to members of the audience, 8 thank you so much for being here today and being part of 9 this overall process. Before we get into any 10 preliminary matters, I want to first take this 11 opportunity to thank our fine, dedicated staff who have 12 put in hundreds and hundreds of hours. 13 late on the weekends, evenings, and in order so that we 14 can have an efficient, fair, and proper proceeding. 15 They've worked Our entire legal staff and technical staff led 16 by Suzanne Brownless and, of course, Bart Fletcher 17 really has done just an outstanding job, so I wanted to 18 take the opportunity to thank you first and foremost. 19 also want to take the time to thank those staff members 20 who attended all of the nine service hearings with us 21 throughout the state of Florida, and as well as my 22 fellow Commissioners, I want to thank you guys for that 23 journey that we took, and appreciate all of the work, 24 especially Cindy Muir, who helped lead all of the -- or 25 organized all of those meetings. FLORIDA PUBLIC SERVICE COMMISSION I 1 Finally, I'd like to thank the prehearing 2 officer in this docket, Commissioner Lisa Edgar, our 3 senior and most experienced Commissioner here. 4 you for taking the time. 5 time and energy into this and managing this docket. 6 thank you for that. 7 000012 Thank I know you put a lot of extra So Now I'd like to give you all an overview, a 8 roadmap of how I foresee the next two lovely weeks that 9 we have here together today. So we have two weeks, 10 approximately 50 witnesses with 11 parties, which 11 includes the Public Service Commission staff. 12 to have an efficient proceeding that is fair to all 13 parties who are involved, while being sensitive of our 14 time constraints, I am planning for us to take about a 15 45-minute lunch break each day where there's a general 16 natural stopping point, taking ten- to 15-minute breaks 17 every two to three hours so that our court reporter can 18 rest and we can all stretch. 19 night before suppertime, hopefully no later than 7:00, 20 but, of course, that is subject to change, depending on 21 how the case proceeds. 22 In order Also, I'd like to end each I'd like to also start the day before 9:30 as 23 much as possible, and so I'll make the announcement of 24 the start time at the conclusion of each day, so that we 25 can cover as much material as possible. Please feel FLORIDA PUBLIC SERVICE COMMISSION 000013 1 free to stretch your legs and move around as much as you 2 need to, but try not to disturb the flow of the 3 proceeding. 4 members who are here today. 5 technical hearing that is being transcribed for the 6 record, so it's important that you're courteous to all 7 parties involved, especially when there's a witness on 8 the stand. 9 you all for being here again, and now we'll get into 10 And that's very important for the audience So I want to take that opportunity to thank some preliminary matters. 11 This is the official MS. BROWNLESS: Staff. Yes, ma'am. The first 12 preliminary matter is sequestration. 13 Florida Hospital and Healthcare Association have both 14 reserved the right within their prehearing statements to 15 request that certain witnesses be sequestered during the 16 hearing. 17 18 19 CHAIRMAN BROWN: All right. FIPUG and South Mr. Moyle, do you wish to request sequestration of witnesses at this time? MR. MOYLE: Yes, ma'am, pursuant to Florida 20 Evidence Code Chapter 90.616(1), we would invoke our 21 statutory right to have witnesses who are testifying in 22 this matter not be in the room, not listen to what's 23 being said on video, not read transcripts, not talk to 24 other witnesses, not talk to lawyers. 25 commonly done in trial and DOAH proceedings and others, But as is FLORIDA PUBLIC SERVICE COMMISSION 1 we'd like to invoke the rule of sequestration of 2 witnesses. 3 4 CHAIRMAN BROWN: 000014 I'll give you an opportunity to argue that in just a moment. 5 Hospital Association, Mr. Wiseman. 6 MR. WISEMAN: 7 Yes, the Hospital Association also would Thank you, Your Honor. 8 request the right to -- or is requesting that witnesses 9 be sequestered, and it would be for all witnesses in 10 this case. 11 CHAIRMAN BROWN: Okay. And I will give each 12 of you an opportunity to argue the merits, and then I'll 13 turn to Florida Power & Light for a response. 14 will start with you, Mr. Moyle, and please provide 15 brief -- a brief argument. 16 MR. MOYLE: Okay. And I Well, I would, I've cited 17 the statute to you, which is 90.616(1), and it says, "At 18 the request of a party, the Court shall order," and it 19 goes on and says the Court can do to it on its own 20 motion, "witnesses excluded from a proceeding so they 21 cannot hear the testimony of other witnesses." 22 it says, "Except as provided in (2)," and there's some 23 exceptions in (2). 24 25 CHAIRMAN BROWN: Hold on one second. you. FLORIDA PUBLIC SERVICE COMMISSION And then Thank 1 MR. MOYLE: Professor Ehrhardt, who is 000015 2 recognized as one of the leading authorities on evidence 3 in the state, in his treatise that is from 2008, 4 June 2008, exclusion of witnesses, has some comments 5 that I think that are instructive. 6 655, that Section 90.616 adopts the view of the federal 7 Rule 615 that sequestration is demandable as a matter of 8 right. He says, on page Also I made this point, I don't think it's 9 10 debatable, but he says on page 656, quote, it seems 11 clear that sequestration prohibits more than merely 12 preventing a witness from hearing another person 13 testify. 14 also involves preventing the prospective witnesses from 15 consulting each other and preventing them from 16 consulting a witness who has left the witness stand. 17 There has also on occasion been discussion Wigmore suggests the process of sequestration 18 about whether the Florida Evidence Code applies, and the 19 provision I'm quoting, 90.616, is contained within the 20 evidence code. 21 is the evidence code and says, "Scope and 22 applicability." 23 shall apply to criminal proceedings related to crimes 24 brought after the effective date of this code and to 25 civil actions and all other proceedings pending on or But I would refer you to 90.103, which And paragraph 2 says, quote, this act FLORIDA PUBLIC SERVICE COMMISSION 1 000016 brought after October 1, 1981. 2 Again, Professor Ehrhardt, at page 655, says 3 "The use of the word proceedings," quote, unquote, "on 4 proceeding instead of the word trial," quote, unquote, 5 "suggests the legislative intent is not to limit the 6 provision to trials." 7 And I would also note that the Florida Supreme 8 Court in Hernandez vs. State of Florida, 4 So.3d 642, 9 addressed sequestration and made the following 10 statement. 11 decisions under the common law emphasize the 12 discretionary nature of the decision to sequester 13 witnesses, Section 90.616 adopts the view that 14 sequestration is demandable as a matter of right." 15 they cite Professor Ehrhardt following that statement. 16 This is on 663, I believe. Quote, while our And So I think the law -- we would argue that the 17 law in Florida is clear that it's a right, just like 18 people are provided a lot of other rights, and it's a 19 right that we would opt to invoke before this 20 proceeding. 21 you tell me you would like me to, you know, kind of 22 explain the reasons why, but -- I don't know that I really need to, unless 23 CHAIRMAN BROWN: 24 Mr. Wiseman. 25 MR. WISEMAN: No. Thank you. Thank you. I'm not going to FLORIDA PUBLIC SERVICE COMMISSION 000017 1 belabor the legal argument Mr. Moyle has raised, and we 2 believe the law in Florida -- in Florida, it's 3 mandatory; if we request sequestration, it must be 4 granted. 5 the specific reasons why we think it's important here, I 6 I'll do that. 7 8 And I'm not sure -- if you want me to get into CHAIRMAN BROWN: Yes, if you could do that very succinctly. 9 MR. WISEMAN: I will. Very simply, there's a 10 lot of overlap on the -- of the issues here where one 11 witness's testimony borders on issues that are raised by 12 another witness, and this proceeding should be hearing 13 the testimony of individual witnesses, what they have to 14 say. 15 the stand, provides testimony, and thinks about it after 16 the fact and says, "Oops, you know, maybe I missed 17 something, maybe there was something I said that was 18 wrong," or another witness is listening in and has the 19 same reaction, there's the opportunity for the second 20 witness, the subsequent witness to effectively pad the 21 record and place things in evidence that really were not 22 within the scope of that witness's testimony. 23 think, as a practical matter, sequestration is needed 24 here. 25 If the process is followed where a witness takes CHAIRMAN BROWN: So we So those are the reasons. FLORIDA PUBLIC SERVICE COMMISSION 1 Okay. 000018 Thank you. 2 And FPL. 3 MR. REHWINKEL: 4 CHAIRMAN BROWN: 5 MR. REHWINKEL: Madam Chairman? Where is that coming from? Public Counsel down here. We 6 would like to be heard on this, but would be happy to go 7 after FPL. 8 9 We do not support sequestration. I don't think it's CHAIRMAN BROWN: appropriate for you to go after FPL, and you did not 10 raise it as an objection during the prehearing 11 conference. 12 My understanding was the only MR. REHWINKEL: 13 requirement is that if you wanted sequestration, you had 14 to raise it. 15 be heard on why it is not a good idea. 16 17 18 We are opposed to it, and we would like to Staff? CHAIRMAN BROWN: All right, you can go right now. MR. REHWINKEL: Okay. The Public Counsel has 19 several witnesses in this case. The request for 20 sequestration came after all the testimony had been 21 filed, at least the company's testimony and the 22 intervenors' testimony. 23 31 years now before this agency and have never 24 encountered sequestration. 25 prefiled in this case. I've been practicing for All of the testimony is All of the depo -- we've taken FLORIDA PUBLIC SERVICE COMMISSION 000019 1 ten-plus depositions. 2 available to all of the witnesses to review and listen 3 to. 4 responses that will make up part of the record in this 5 case, and that has been available to all of the 6 witnesses. 7 Those have been open and There are hundreds, if not thousands, of discovery Sequestration, as it is stated in the statute, 8 bars witnesses from hearing the testimony of other 9 witnesses. FPL has $20,000 of rate case expense 10 estimate in here for stenotype reporters, which we 11 believe means they take daily transcripts of the 12 proceedings and disseminate that as they need throughout 13 their cadre of witnesses and support personnel. 14 not believe that is a fair and level playing field to 15 have sequestration with all of the resources that are 16 available to FPL that we don't have. 17 everything and structured our case with the 18 understanding that our witnesses would be able to assist 19 us in cross-examination, as has been done for decades 20 before this agency, and it is a substantial hardship to 21 us to represent the people of the state of Florida with 22 sequestration. 23 requested. 24 that has been in place that we have replied upon in 25 preparing our case, preparing our evidence to present to We do We have done We understand the reason for it being We do not believe that it fits the process FLORIDA PUBLIC SERVICE COMMISSION 000020 1 the Commission, and it will make a significant hardship 2 to us. If you do grant sequestration, we would urge 3 4 and say that it is only fair that the order on 5 sequestration be plenary, comprehensive, and global, and 6 restrict all witnesses from knowing anything about 7 what's been testified to live in the hearing. 8 daily transcripts, no memos, no listening on the phone, 9 on the internet, watching it on television, any 10 communication. 11 effective and it is unfair to the parties. No live It has to be plenary or it's not This statute, we believe, is not written for 12 13 the process that goes on at this Commission where it -- 14 this proceeding is on the telephone, it can be seen 15 around the world, it's seen statewide on television, and 16 all of the evidence has been prefiled. 17 reasons, we do not support it. 18 CHAIRMAN BROWN: 19 you raised. 20 FPL? So for those Thank you. Excellent, good points that Parties, any other parties before I turn to Would any other parties like to chime in? 21 All right. 22 MR. BUTLER: Mr. Butler. Well, Mr. Rehwinkel certainly 23 stole my thunder. 24 the reasons, frankly, that Mr. Rehwinkel laid out. 25 FPL opposes sequestration for many of I would point out that, you know, the Hospital FLORIDA PUBLIC SERVICE COMMISSION 000021 1 Association and FIPUG rely too heavily on the evidence 2 code. 3 administrative quasi-judicial proceeding. 4 as 1957, the Florida Supreme Court has acknowledged, 5 quote, in administrative proceedings, the formalities 6 and the introduction of testimony common to the courts 7 of justice are not strictly employed. 8 Groot v. Sheffield, 95 So.2d 916, Florida 1957. This is a -- not a judicial proceeding. It's an As far back That's from De 9 There's a decision of the Florida First DCA in 10 2011, Bush v. City of Mexico Beach, 711 -- or 71, sorry, 11 So.3d 147, that makes the same point under the 12 1996 amendments to the Florida APA. 13 So you are not, as Mr. Moyle and Mr. Wiseman 14 would suggest, bound to follow the Florida Evidence Code 15 in your decisions on sequestration here. 16 even if the evidence code applied, you know, there are 17 exceptions. 18 them a lot of attention in his comments. 19 under Section 90.616(2)(c), the Florida courts have 20 frequently excluded expert witnesses from the 21 application of the rule of sequestration, and we have a 22 lot of expert witnesses here. 23 Furthermore, Mr. Moyle alluded to them but didn't give One of them, And finally, I'd just reiterate what 24 Mr. Rehwinkel had said. 25 testimony. You know, there's prefiled There are depositions. People know what FLORIDA PUBLIC SERVICE COMMISSION And there's a decision in 000022 1 other witnesses have said. 2 the Florida Supreme Court in 2000, Beasley v. State, in 3 which -- really fairly similar circumstances. 4 court denied sequestration where the testimony of the 5 witness for whom sequestration was sought had already 6 been memorialized in a deposition, and the court 7 basically said, "What's the point? 8 already there." 9 decision of the trial court. The testimony is The Supreme Court affirmed that So for all of those 10 reasons, we urge you to deny the request for 11 sequestration. 12 A trial CHAIRMAN BROWN: Thank you. Having heard 13 arguments from all the parties here today who spoke, my 14 ruling is that the motion for sequestration of witnesses 15 by FIPUG and the Hospitals is denied. 16 be sequestered in this case for of all the reasons 17 articulated by Office of Public Counsel and FPL. 18 not practical, nor is it appropriate in this proceeding. 19 Thank you. No witnesses will It's 20 Moving on to other preliminary matters. 21 MS. BROWNLESS: 22 is witness availability. 23 Hospital and Healthcare Association indicated that its 24 witnesses, Mr. Baudino, Baron, and Kollen, would only be 25 available on Thursday and Friday, August 25th and 26th, Yes, ma'am. The next matter Last week, the South Florida FLORIDA PUBLIC SERVICE COMMISSION 000023 1 and not available at all on the second week of the 2 hearing. 3 date certain for the appearance of its witness, Michael 4 Brosch. AARP also wished to have the Commission set a 5 Additionally, some of OPC's, Wal-Mart's, and 6 FIPUG's witnesses are not available during portions of 7 the first or second weeks of the hearing. 8 understanding is that FP&L wishes to present its direct 9 case without interruption, but is thereafter amenable to My 10 accommodate the schedules of these witnesses. 11 this matter has been the subject of many emails over the 12 last week and, frankly, a bit confusing for me, I would 13 like to ask each of the parties if they have any 14 scheduling requests at this time. 15 16 17 CHAIRMAN BROWN: All right. Because Let's go with the ones that we have those challenges, starting with FIPUG. MR. MOYLE: So as we've done in multiple 18 proceedings before, the parties typically work well with 19 each other about scheduling witnesses and a lot of 20 witnesses have to come in from out of town. 21 one witness, Mr. Jeff Pollock. 22 Mr. Butler. 23 least the first week, so I didn't worry about that. 24 then Mr. Pollock is not available toward the end of the 25 second week and he's available the 29th, 30th, and 31st. FIPUG has And I consulted with He thought his case was going to go for at FLORIDA PUBLIC SERVICE COMMISSION But 000024 1 And for travel plans, I asked everybody, "How about if 2 he goes on the morning of the 30th?" 3 and said they had a problem with that, so, you know, 4 he's scheduled to be down here Monday night and 5 hopefully take the stand Tuesday, the 30th. 6 CHAIRMAN BROWN: 7 MR. WISEMAN: Okay. Nobody wrote back Hospitals. Thank you, Madam Chair. Just a 8 clarification. I've made clear to FPL -- it wanted to 9 know whether we were requesting that our witnesses take 10 the stand prior to the conclusion of FPL's direct 11 testimony, and we made clear we are not. 12 real challenge for our witnesses to get here the second 13 week, but we don't intend to interfere with FPL's direct 14 case. 15 for our witnesses. 16 17 It will be a So the 25th and the 26th are the preferable dates CHAIRMAN BROWN: That's Thursday and Friday of this week. Yes. 18 MR. WISEMAN: 19 CHAIRMAN BROWN: 20 MR. WISEMAN: Okay. If that becomes impossible, then 21 one way or another we will get our witnesses here the 22 following week, but right now I can't give you -- there 23 will be some days they can't show up, and we'll have to 24 figure that out a little bit on the fly. 25 CHAIRMAN BROWN: Okay. And the next, FEA. FLORIDA PUBLIC SERVICE COMMISSION 1 MR. JERNIGAN: Ma'am, while we don't have 000025 2 specific dates our witnesses have to be appear, they are 3 all traveling out of town. 4 of approximately what days so that we can arrange that 5 travel and have them here for those specific days and 6 limit the number of days that they need to be here, it 7 would be appreciated. 8 CHAIRMAN BROWN: 9 MR. JERNIGAN: Yes, that is that challenge. Thank you, ma'am. 10 CHAIRMAN BROWN: 11 MS. CSANK: 12 And if we could get an idea Sierra. Chairman Brown, we do not plan to present witnesses. 13 CHAIRMAN BROWN: 14 And the last -- Wal-Mart. Okay. And -- I know that. (Not on microphone). 15 MS. ROBERTS: 16 CHAIRMAN BROWN: Pardon me. Could you please 17 come up? 18 a notice of appearance as well, so please give -- at 19 this time give your notice of appearance. 20 I don't believe you had an opportunity to give MS. ROBERTS: Certainly. Stephanie Roberts 21 for Wal-Mart. 22 also ask that my colleague Derrick Williamson be 23 acknowledged for the hearing. 24 to be appearing. 25 I'm at Spilman, Thomas & Battle. I would He and I are both going Our witness, Steve Chriss, was available this FLORIDA PUBLIC SERVICE COMMISSION 1 week. 2 realized, you know, we don't intend to interrupt FPL's 3 case. 4 on the 1st, so I've asked that he do that. 5 traveling from Arkansas. 6 But after speaking with Ms. Brownless, we 000026 And so Mr. Chris is also available to come back CHAIRMAN BROWN: Thank you. He's And we'll try to 7 get you a seat here. 8 you expeditiously so that she has a seat available. 9 Our staff will try to accommodate And Public Counsel. Thank you. Madam Chairman, we 10 MR. REHWINKEL: 11 think we're pretty good. 12 witnesses. 13 Sunday with the assumption that the pace of the 14 company's case will take them at least through Friday. 15 Ralph Smith is not available on the first two days, but 16 he's our last witness and he will go last. 17 We're flexible with our We've asked our witnesses to travel on Mr. Pous is flexible on his timing as well and 18 he lives the closest. So he's available on all the days 19 and we can make it work. 20 the Wednesday and Thursday, but we would hope to move 21 him -- take him up early. 22 available on Tuesday. 23 believe that we have the flexibility to move our 24 witnesses around to put it in the window between the 25 company's and the direct and rebuttal. Mr. Dismukes is not available And Mr. O'Donnell is not But having said all that, we FLORIDA PUBLIC SERVICE COMMISSION 1 CHAIRMAN BROWN: 2 Wal-Mart. 3 MR. COFFMAN: 4 CHAIRMAN BROWN: 5 MR. COFFMAN: Excellent. Thank you. 000027 AARP? I mean, AARP. Yes. Thank you. We have one witness, 6 Michael Brosch, who is not available this week, so we 7 don't expect that it would interfere with the direct 8 case of the utility, but we would respectfully request a 9 date certain. Tuesday the 30th would be the most 10 convenient, although we could do it another day next 11 week. 12 30th is good, we would like to lock that in. But we'd just request a date certain. All right. 13 CHAIRMAN BROWN: 14 FPL, any response? 15 MR. BUTLER: If the Thank you. I've not heard anything that 16 would be too difficult to accommodate if we can fit it 17 in after the end of our direct case and ideally before 18 we start our rebuttal case. 19 order works for everyone else. 20 CHAIRMAN BROWN: We're flexible on whatever Okay. Thank you. And I do 21 strongly believe that any petitioner should be allowed 22 to put on its case in chief first and foremost. 23 the extent -- this Commission is always willing to work 24 with the parties and accommodating the witness 25 schedules. And to But to the extent the intervenors can work FLORIDA PUBLIC SERVICE COMMISSION 000028 1 together along with FPL and agree on how to arrange the 2 witnesses differently than they appear in the Prehearing 3 Order, we'll try to accommodate those requests too. 4 we will first begin with the first week at least so that 5 FPL can present its full case in chief. 6 Mr. Moyle. 7 MR. MOYLE: But Just a somewhat related matter. I 8 think in the prehearing conference we established that 9 the witnesses are going to appear based in the order as 10 set forth in the Prehearing Order, and that FPL said 11 they're not going to take any direct and rebuttal 12 witnesses at the same time. 13 preparation and getting ready. 14 there's a change, I don't think it's something that's 15 contemplated for just to be we're changing the order as 16 compared to letting everyone know we're changing the 17 order and making sure everyone is comfortable with the 18 proposed change in the order. 19 CHAIRMAN BROWN: 20 MR. BUTLER: That's important for So to the extent that Excellent. FPL. We don't have any intent of 21 changing the order of our witnesses. 22 comment in terms of being flexible to work with the 23 parties on changes to the intervenor witnesses. 24 25 CHAIRMAN BROWN: And I meant my That's what I thought you meant. FLORIDA PUBLIC SERVICE COMMISSION 1 2 3 4 5 All right. 000029 Any other matters on the witness availability? Okay. Ms. Brownless, let's move on to other preliminary matters. MS. BROWNLESS: Yes, ma'am. The next 6 preliminary matter is the matter of affidavits recently 7 filed by the Sierra Club. 8 that it be allowed to have ten Sierra Club member 9 witnesses testify at this final hearing regarding its The Sierra Club has requested 10 associational standing or, in the alternative, mark for 11 identification the affidavits of these witnesses as a 12 composite exhibit to be admitted into evidence at the 13 beginning of the hearing. 14 marked for identification as Exhibit 113A on page 26 of 15 the Prehearing Order. 16 CHAIRMAN BROWN: 17 MS. CSANK: The Sierra Club exhibits are Sierra Club. Good morning, Chairman Brown. As 18 we circulated to the parties in this case, the Sierra 19 Club and FPL are prepared to stipulate that Sierra Club 20 has associational standing and meets the standing 21 requirements under Florida rules both for the 22 administrative proceedings purposes as well as for 23 appellate purposes. Thank you. 24 CHAIRMAN BROWN: 25 FPL, can you confirm? FLORIDA PUBLIC SERVICE COMMISSION 000030 1 MR. BUTLER: We have so stipulated, of course 2 with the understanding that as a result, they will 3 withdraw their request to enter the affidavits into the 4 record. Thank you. 5 CHAIRMAN BROWN: 6 Sierra Club, will you confirm that? 7 MS. CSANK: 8 CHAIRMAN BROWN: 9 Yes. Thank you. I also reaffirm the standing of Sierra Club to fully participate as a 10 party in this proceeding, so -- which was granted 11 previously in PSC Order PSC-16-0299-PCO-EI, which was 12 issued on July 27th. 13 affidavits. So we are finished with the 14 Ms. Brownless. 15 MS. BROWNLESS: I just want to make sure that 16 I have the stipulation straight. 17 you are withdrawing Exhibit 317A; is that correct? 18 CHAIRMAN BROWN: 19 MS. CSANK: 20 MS. BROWNLESS: 21 CHAIRMAN BROWN: And so we will not -- Sierra Club? Yes, that's correct. Thank you so much. All right. Moving on to any 22 other preliminary matters? 23 for official recognition, Ms. Brownless; is that 24 correct? 25 MS. BROWNLESS: I believe we have a motion Yes, ma'am, that's the next FLORIDA PUBLIC SERVICE COMMISSION 1 000031 thing. 2 CHAIRMAN BROWN: All right. I'm going to 3 entertain very brief arguments on the motion first by 4 FPL and then by the intervenors. 5 MS. MONCADA: 6 Stress again, brief. Thank you. I will try to be as brief as possible. FPL filed this motion for official recognition 7 8 of certain Commission orders out of an abundance of 9 caution. We are, of course, aware of the practice that 10 this Commission has to recognize its own orders and that 11 any party is free to cite the Commission's orders in 12 their post-hearing brief. 13 The reason FPL files this motion is because we 14 have done some research on appellate precedent and found 15 some case law that makes it not exactly black and white 16 but it's actually murky as to whether we can then on 17 appeal, if an appeal were to occur, cite and rely on the 18 Commission orders, and that is the reason for our 19 motion. 20 As a matter of law, we have satisfied all of 21 the legal requirements. We provided the parties the 22 sufficient time. 23 says that a tribunal can take judicial notice of 24 official actions of legislative, executive, and 25 judicial -- official actions of the legislative, We've cited Section 90.202(5), which FLORIDA PUBLIC SERVICE COMMISSION 000032 1 executive, and judicial departments of the state. 2 Although the other parties objected to this motion, no 3 one has taken the position that this is not an official 4 action as contemplated by the rule. 5 Instead, the parties' objections appear to be 6 that the Commission already has in place a practice to 7 recognize the orders. 8 that, but rather thought this was a streamlined, 9 efficient way to get the orders into the record, if we 10 And we don't intend to disturb so needed it on appeal. 11 CHAIRMAN BROWN: 12 MS. MONCADA: 13 CHAIRMAN BROWN: 14 Thank you, Ms. Contada (sic). Moncada. Moncada. Thank you for the correction. 15 And for future matters, if FPL does wish to 16 continue this practice of filing motions for official 17 recognition, it would be helpful in the schedule to 18 actually write the name -- the title in addition to the 19 order number. 20 acceptable and -- accessible, it's helpful to see what 21 the case is in the order. 22 Although I do think it's easily MS. MONCADA: We will do so. And we can also 23 provide a replacement schedule, if that would be helpful 24 for this Commission. 25 CHAIRMAN BROWN: I believe staff would FLORIDA PUBLIC SERVICE COMMISSION 1 2 000033 appreciate that, as would I. We are going to take argument now from Public 3 Counsel and then the rest of the intervenors who are 4 opposing this, starting with Mr. Rehwinkel. 5 MR. REHWINKEL: Thank you, Madam Chairman and 6 Commissioners. The Public Counsel opposes this because 7 it is not required and we believe that it is a trap for 8 the unwary. 9 this looks like about 100 orders. We do not -- there's nothing in -- I think There's no 10 description of the orders and what they relate to and 11 how they relate to the case. 12 They're -- I assume from FPL's motion that 13 they're saying that they're worried that when they get 14 into the appellate sphere, that there will be a lack of 15 nexus between the orders that they would cite and the 16 case, but this piece of paper and these bare numbers do 17 not provide any nexus. 18 We would supplement that request and ask the 19 Commission to just take notice, official recognition of 20 all of your orders and that -- the case -- the problem 21 would be solved. 22 different from this naked list of orders and these 23 documents here, which are the official reporters. 24 120.53 requires you to index all of your orders. 25 would ask that if you were to grant such a motion, that Because qualitatively there's nothing FLORIDA PUBLIC SERVICE COMMISSION So we 1 you'd just take notice of all orders that are indexed 2 pursuant to 120.53, and that would solve the problem 3 that is presented. 000034 It -- we understand the concern by FPL about 4 5 getting into the appellate world and having some fault. 6 But we think if you just take a broad notice of all your 7 orders, that fixes that, if that's the nature of it. 8 But more to the point, parties that don't do this would 9 be subject to some sort of fault from here on unless 10 you're going to make that a practice. This is late. It 11 came on Friday, very late in the process, less than 12 72 hours before the start of this hearing, and I believe 13 the appropriate time to have raised this would have been 14 much earlier in the process where the parties could 15 have -- rather than getting ready for the -- preparing 16 for testimony and cross-examination and the hearing 17 itself, spent time trying to review 100 orders. 18 unfair. 19 late, and the fix is really to just take notice of all 20 your orders pursuant to one -- that you indexed pursuant 21 to 120.53. It's So we think that it is unneeded and this is too Thank you. 22 CHAIRMAN BROWN: 23 MS. MONCADA: Thank you. Madam Chair, I hate to 24 interrupt, but if it would short circuit further 25 arguments on this matter, FPL is willing to agree to FLORIDA PUBLIC SERVICE COMMISSION 1 that stipulation that OPC has suggested. 2 provided also other alternatives, which is to have 3 everyone submit a comprehensive list or a joint 4 expensive list at the end. 5 6 We have 000035 And that's the recognition of CHAIRMAN BROWN: all orders that are indexed? 7 MS. MONCADA: We would agree to OPC's 8 suggestion to recognize all orders that are indexed or 9 alternatively provide a comprehensive list for all 10 parties. 11 This is getting murky here CHAIRMAN BROWN: 12 now, so let's just do this. 13 willingness to stipulate, but I'd like to hear from all 14 of the parties first, okay, that object to the motion. 15 And it was filed two days -- staff; is that correct? 16 MS. BROWNLESS: 17 CHAIRMAN BROWN: 18 MS. BROWNLESS: 19 CHAIRMAN BROWN: I appreciate the Yes, ma'am. So it is a timely motion. Yes, ma'am. Okay. So I'd like to hear 20 all other arguments opposing the motion, starting with 21 AARP. 22 I'll just go down the line here. MR. COFFMAN: Thank you, Your Honor. We 23 oppose the motion as well. I'm not aware of any forum 24 where the deciding body has to recognize its own orders. 25 It seems completely unnecessary, and it does concern me. FLORIDA PUBLIC SERVICE COMMISSION 000036 1 There are a couple of prior Florida PSC orders that we 2 would wish to cite to ourselves, and now we're concerned 3 that maybe we didn't do something that we should have 4 done, didn't have notice that we should have done. 5 I guess in the alternative, we would support OPC's idea 6 of recognizing all previous PSC orders. 7 CHAIRMAN BROWN: 8 FRF. 9 MR. WRIGHT: Okay. But Great. Thank you, Madam Chairman. Good 10 morning. Frankly, FPL's motion is a solution where 11 there is no problem. Your Order Establishing Procedure 12 states the following. "The Commission will recognize 13 Florida Statutes, Commission rules, and Commission 14 orders. 15 recognition of those materials." 16 phrase that I just emphasized in its motion. 17 their motion is unnecessary. 18 to file this three days before the hearing. 19 youngest case they cite in their motion is from 1990. 20 This could have been brought up much earlier. 21 have been brought up at the prehearing if it was an 22 issue. Accordingly, it is unnecessary to seek official FPL left out the It's clear There's no reason for them The It could 23 I do agree with Mr. Rehwinkel's suggestion and 24 we would cheerfully stipulate that basically what you're 25 Order Establishing Procedure says, you'll take official FLORIDA PUBLIC SERVICE COMMISSION 000037 1 recognition of all orders. 2 to resolve this problem today we can stipulate to 3 recognize all your orders. 4 Thank you very much. 5 CHAIRMAN BROWN: 6 MR. WRIGHT: 7 CHAIRMAN BROWN: 8 MR. SKOP: 9 10 But I think as a stipulation I think it's that simple. Okay. Thank you. Thank you. Mr. Skop. Thank you, Madam Chair. The Larsons also concur with Public Counsel and the rest of the intervenors in opposing the FPL motion. Thank you. FEA? 11 CHAIRMAN BROWN: 12 Sierra Club, you're not listed as opposing. 13 Do you oppose? (Nods negatively.) 14 MS. CSANK: 15 CHAIRMAN BROWN: 16 MR. JERNIGAN: No? FEA? Ma'am, I believe that our 17 position has already been laid out by the previous 18 intervenors, and we continue to oppose and believe that 19 your order is clear already. Thank you. Thank you. 20 CHAIRMAN BROWN: 21 Hospitals? 22 MR. WISEMAN: 23 agree with the other Intervenors. 24 the motion for the reasons that have been stated, and we 25 would stipulate to the alternative proposed by OPC. Thank you, Madam Chair. We We continue to oppose FLORIDA PUBLIC SERVICE COMMISSION 1 CHAIRMAN BROWN: 2 Now, Mr. Moyle. 3 MR. MOYLE: 000038 Thank you. Thank you. The -- your legal 4 counsel, my recollection, has advised you over the years 5 to say there's no need to take official recognition of 6 your orders, that parties are free to cite them and can 7 cite them. And FPL is not even suggesting that there is 8 a problem. They're saying, "Oh, there may be a problem. 9 It might be murky." Well, there's murky laws out there. 10 We just had our sequestration argument. 11 murky area of the law as well. 12 let's go with the longstanding practice of the 13 Commission, which is, you know -- 14 15 CHAIRMAN BROWN: That may be a And you have said there, I did not say that, Mr. Moyle. 16 MR. MOYLE: Okay. I'm sorry. Well, anyway, 17 the ruling was consistent with the longstanding 18 practice. 19 to take official recognition of orders like this because 20 I think it's -- you know, Mr. Rehwinkel, I think, used 21 the words "trap." 22 if you don't put the order in there, then somehow if 23 you're up on appeal and you find -- or are aware of a 24 PSC order and you didn't put it in the list, you're, you 25 know, not able to cite it? The longstanding practice here has not been It's a little bit of a surprise. That seems to me to be FLORIDA PUBLIC SERVICE COMMISSION So 000039 1 unfair and surely not adequate notice with it be being 2 filed on Friday. 3 needed. 4 And I don't -- you know, it's not I mean, consistent with your advice of your 5 counsel, I would suggest that you deny the motion. If 6 there is going to be a subsequent motion by 7 Mr. Rehwinkel to take notice of everything, then I think 8 that should be handled as a separate motion. 9 part of this motion. It's not This motion is to take official 10 recognition, and we would oppose it. 11 CHAIRMAN BROWN: Thank you. And before I turn 12 to staff or find staff, I'll give FPL an opportunity to 13 address the stipulation again and also the comments that 14 were made. 15 MS. MONCADA: Sure. We, again, are willing to 16 enter into the stipulation that was suggested by 17 Mr. Rehwinkel and was agreed to by most of the 18 intervenors. 19 that your Commission practice and that your advisors 20 have stated throughout the years that there is no need 21 to take official recognition. 22 citing the Commission orders in the post-hearing brief. 23 And the concern here is what the appellate courts would 24 do, and that is the reason we have filed this motion in 25 an abundance of caution. In addition, many have pointed out again That is for purposes of But, again, it seems like FLORIDA PUBLIC SERVICE COMMISSION 000040 1 Mr. Rehwinkel came up with a workable solution that we 2 are agreeable to. 3 CHAIRMAN BROWN: 4 Ms. Helton. 5 MS. HELTON: Okay. Thank you. I agree that it seems like we 6 have a workable solution to a problem that I'm not sure 7 is a real problem or not. 8 I have no issue with taking official recognition of all 9 Commission orders by you today, as has been suggested by But given that, I think that 10 OPC and agreed to by Florida Power & Light and some of 11 the other parties. 12 13 14 CHAIRMAN BROWN: Thank you, and that's what we'll do. All right. Moving on to other matters. 15 there any other matters at this time? 16 to the parties as well. 17 Mr. Rehwinkel? 18 MR. REHWINKEL: Are And I'm turning Any other preliminary matters, Yes. Madam Chairman, I would 19 like to make a few comments about the process that has 20 occurred to date. 21 to commend the Commission and Prehearing Officer for 22 dealing with a very complex case that has changed as -- 23 since March 15th as it was filed. 24 put on the record some observations about the state of 25 case and the process before we -- The Public Counsel has -- would like But we just want to FLORIDA PUBLIC SERVICE COMMISSION Is there a preliminary 1 CHAIRMAN BROWN: 2 matter, or is this just narrative? 3 MR. REHWINKEL: 000041 Well, I can make some 4 objection. I would like to make some objections about 5 the process that has occurred. 6 the record. I need to state this for 7 CHAIRMAN BROWN: Okay. 8 MR. LITCHFIELD: Madam Chairman, we would ask 9 whether any of these objections should have been made 10 before the prehearing conference. 11 to roll. 12 identified, teed up, and addressed, and now we're 13 hearing for the first time that Mr. Rehwinkel has a 14 narrative that he would like to walk the Commission 15 through. 16 Frankly, we're ready We thought we had all the preliminary matters CHAIRMAN BROWN: 17 Mr. Rehwinkel. 18 need to address that -- I kind of agree with that, Is there a preliminary matter that you 19 MR. REHWINKEL: 20 CHAIRMAN BROWN: Okay. I can. Is there a preliminary matter 21 that you need to address that is ripe for consideration 22 at this time, not a narrative? 23 MR. REHWINKEL: Yes, there is, because I'm 24 going to now, thanks to Mr. Litchfield, object to the 25 process. I want to raise an objection for appellate FLORIDA PUBLIC SERVICE COMMISSION 1 000042 purposes. 2 CHAIRMAN BROWN: 3 MR. REHWINKEL: Okay. Okay. Please proceed. It could have been done 4 a little bit less, but we will take it all the way. 5 Thank you. The Public Counsel would like to state for the 6 7 record and object to this hearing process. The case was 8 filed on March 15th. 9 Along with that testimony was an exhibit that was a Testimony was filed on March 15th. 10 depreciation study of the company. Ninety days later, 11 they amended that document, 21 days before intervenor 12 testimony was due at a time when discovery could not 13 have been conducted on that amended document. 14 our due process was denied. So we -- On May 3rd, the dismantlement study was 15 16 corrected 45 days after it was filed. 17 the company filed a petition for an incentive mechanism 18 to be considered in this case a month after the deadline 19 for filing testimony in the case itself. 20 that as a matter of record and as a matter of due 21 process. 22 23 On April 15th, We object to So I was -- want to state those for the record, and I have now done that. 24 CHAIRMAN BROWN: 25 FPL. Thank you. Thank you. FLORIDA PUBLIC SERVICE COMMISSION 1 MR. LITCHFIELD: May we respond briefly? 2 CHAIRMAN BROWN: Yes. 3 MR. LITCHFIELD: Certainly all of those, it 000043 4 strikes me, could have and should have been raised well 5 before now, certainly even well before the prehearing 6 conference. 7 words, not to slow down the process here today, is we'll 8 get back and provide a written response into the record 9 with respect to those objections at some point over the 10 next few days, and we're ready to move forward on that 11 basis. 12 What we would propose to do, in other CHAIRMAN BROWN: Just a moment. Office of 13 Public Counsel, do you have a written -- written 14 objections that you'd like to file? 15 MR. REHWINKEL: 16 CHAIRMAN BROWN: 17 18 We would be happy to do one. I think that would be appropriate in response to FPL's comments. MR. REHWINKEL: Our objection is for the 19 record and it's an ore tenus motion, but we'd be happy 20 to make that objection written. All right. Mr. Moyle. 21 CHAIRMAN BROWN: 22 MR. MOYLE: 23 would join in FPL's objection. 24 it's an objection and I guess -- I'm not sure of the 25 motion, but it's an objection to -- that due process So just for the record, FIPUG As we understand it, FLORIDA PUBLIC SERVICE COMMISSION 1 wasn't provided. 2 don't know what the motion asks you to do. 3 us another month before we start. 4 just join the objection for the record. 5 So I think that's the objection. CHAIRMAN BROWN: I 000044 Maybe give But, anyway, we would All right. Any other parties 6 would like to comment before I turn to our legal staff 7 on this? 8 9 10 11 12 13 14 15 16 Madam Chairman, we'll join the MR. WRIGHT: objection for the record and, if necessary, address it in our brief. Thank you very much. CHAIRMAN BROWN: appropriate. Okay. That's very Thank you. MR. WISEMAN: Madam Chair, SFHHA also would join, for the record, in the objection. CHAIRMAN BROWN: Any other objections by any of the intervenors? Sierra Club will also join. 17 MS. CSANK: 18 MR. JERNIGAN: 19 CHAIRMAN BROWN: 20 MR. SKOP: 21 CHAIRMAN BROWN: 22 MR. COFFMAN: 23 CHAIRMAN BROWN: 24 Wal-Mart? 25 MS. ROBERTS: FEA will also join. Okay. The Larsons will also join. Okay. AARP will join as well. Thank you. Wal-Mart will join as well. FLORIDA PUBLIC SERVICE COMMISSION 1 2 CHAIRMAN BROWN: there? 3 4 MS. ROBERTS: I am? CHAIRMAN BROWN: 6 MS. ROBERTS: 7 CHAIRMAN BROWN: 8 All right. I'm fine for now. Thank you. Yes, Ms. Brownless, I would love MS. BROWNLESS: I just want to make sure I understand what the actual objection and motion is. 12 13 Okay. to hear from you. 10 11 We are going to change at the break. 5 9 Are you okay sitting over 000045 CHAIRMAN BROWN: Mr. Rehwinkel, that is you. Ms. Brownless asked you what -- thank you. 14 MR. REHWINKEL: We will provide it in writing, 15 but our objection is that we have been denied due 16 process because we did not have sufficient opportunity 17 to respond to late-filed information having to do with 18 the depreciation study, the dismantlement study, and the 19 storm hardening -- I mean, the -- I apologize -- the 20 incentive mechanism that was filed on April 14th. 21 we object for the record that our rights were denied 22 because our opportunity to respond was limited, and it 23 impacted our ability to represent our clients. 24 25 CHAIRMAN BROWN: motion. And So it's definitely not a It's just a blanket objection of due process. FLORIDA PUBLIC SERVICE COMMISSION 000046 That's correct. 1 MR. REHWINKEL: 2 CHAIRMAN BROWN: 3 MS. BROWNLESS: Thank you so much. 4 MR. REHWINKEL: Madam Chairman, in stating -- Okay. 5 my intent when we started off this process, to be clear, 6 was that we wanted to state that -- we wanted to state 7 these objections, and we are about to engage in a 8 process that has many, many opportunities for either the 9 granting or the denial of due process, and we were just 10 trying to lay a foundational premise that we would hope 11 would be taken into consideration as we go forward. 12 I was going to say that in light -- even under 13 all of this, the company has been very good in working 14 with us in getting us information in a timely fashion, 15 discovery in a timely fashion. 16 a lot to help the process in my opinion. But I needed 17 to state this objection for the record. I'd be glad to 18 do it in writing, but I was not intending to -- 19 CHAIRMAN BROWN: 20 necessary at this point. 21 necessary. 22 MR. REHWINKEL: 23 CHAIRMAN BROWN: 24 MS. HELTON: 25 They have gone and done I don't think that's Thank you. It's not Thank you. Mary Anne. Madam Chairman, I think I just heard -- or we've heard today an objection and that FLORIDA PUBLIC SERVICE COMMISSION 000047 1 Florida Power & Light wants an opportunity to respond in 2 writing. 3 type of relief. 4 to make this objection on the record. 5 been done, and I think you can now move forward with the 6 hearing. I haven't heard a specific request for any I think Mr. Rehwinkel is just wanting 7 CHAIRMAN BROWN: 8 Okay. 9 Thank you. Moving on, any other preliminary matters? I believe we have some proposed stipulations 10 11 Awesome. I think that's to get to. 12 MS. BROWNLESS: Yes, ma'am. 13 CHAIRMAN BROWN: Thank you. 14 MS. BROWNLESS: Okay. All parties have agreed to 15 stipulate Issue No. 73A and B, and the stipulation would 16 be the appropriate method of calculating working capital 17 is the balance sheet method. And with regard to Issue No. 117A, Florida 18 19 Power & Light, OPC, AARP, FRF, the Larsons, and South 20 Florida have agreed to stipulate to Issue 117A as 21 follows. 22 utility property is 5.759 million for the 2017 test 23 year." 24 no position on this issue; therefore, it appears that it 25 can be a Type B stipulation. "The appropriate level of gain on disposal of FIPUG, Sierra Club, Wal-Mart, and FEA have taken FLORIDA PUBLIC SERVICE COMMISSION 1 CHAIRMAN BROWN: Thank you. 000048 And first, does 2 any party disagree with the representation made on the 3 stipulation of Issues 73A and B? 4 right. 5 of their position on Issues 117A? 6 any party object to the stipulation of Issue 117A as it 7 is worded? 8 so -- 9 Seeing none. All Does any party disagree with the representation Okay. Seeing none. Does I do not see any, Ms. Brownless, and MS. BROWNLESS: At this time, should the 10 Commission desire to do so, you could vote to accept 11 those stipulations. Thank you. 12 CHAIRMAN BROWN: 13 Commissioner Edgar. 14 COMMISSIONER EDGAR: Madam Chair, if you're 15 open to it, I would move approval of the stipulations as 16 described. Thank you. 17 CHAIRMAN BROWN: 18 Is there a second? 19 COMMISSIONER BRISÉ: 20 CHAIRMAN BROWN: 21 (Vote taken.) 22 All right. 23 MS. BROWNLESS: Second. All those in favor, say aye. The stipulations pass. Thank you. At this time, we would also 24 like to discuss the stipulation of witnesses. 25 parties have agreed to stipulate the testimony and FLORIDA PUBLIC SERVICE COMMISSION All 000049 1 exhibit, which is Exhibit No. 397 on the Comprehensive 2 Exhibit List of staff audit witness Iliana Piedra into 3 the record and to excuse her from attending this final 4 hearing. 5 be inserted into the record after that of Rhonda Hicks, 6 if that is acceptable to the Chair. 7 CHAIRMAN BROWN: We would suggest that Mr. Piedra's testimony Okay. Yes. We'll admit the 8 testimony of Iliana Piedra as though read and will admit 9 at this time, seeing no objections, Exhibit 397, and 10 11 12 13 14 excuse the witness from her participation. (Exhibit 397 marked for identification and admitted into the record.) Are there any other witnesses that have been stipulated by the parties at this time? 15 MS. BROWNLESS: 16 CHAIRMAN BROWN: 17 18 No, ma'am. Okay. Let's move along to exhibits, please. MS. BROWNLESS: Yes, ma'am. Staff has 19 prepared a Comprehensive Exhibit List that includes all 20 exhibits attached to the witnesses' prefiled testimony 21 as well as staff's identified exhibits. 22 is marked as Exhibit No. 1 and has been provided to the 23 parties, the Commissioners, and to the court reporter. 24 At this time, staff would request that Exhibit No. 1 be 25 entered into the record and all other exhibits be marked The list itself FLORIDA PUBLIC SERVICE COMMISSION 1 2 for identification as identified therein. Okay. CHAIRMAN BROWN: 000050 Seeing no objection, 3 staff would request that Exhibit No. 1 be entered into 4 the record, and all other exhibits be marked for 5 identification purposes. 6 7 8 9 10 11 (Exhibit 1 marked for identification and admitted into the record.) (Exhibits 2 through 396 and 398 through 558 marked for identification.) MS. BROWNLESS: CHAIRMAN BROWN: 13 MS. BROWNLESS: 15 16 Thank you. We would have one correction to the Comprehensive Exhibit List. 12 14 Okay. Okay. And that would be on page 490 -- Exhibit No. 490 on page 47. CHAIRMAN BROWN: And it's just -- Just wait a second, please, so that everyone can get there. 17 MS. BROWNLESS: 18 CHAIRMAN BROWN: 19 MS. BROWNLESS: Yes, ma'am. Please. All right. Exhibit No. 490 should read 20 Ousdahl for sponsoring witness 10 and 1, not 10 21 through 1. 22 CHAIRMAN BROWN: 23 MS. BROWNLESS: 24 CHAIRMAN BROWN: 25 MS. BROWNLESS: How about 1 and 10? Yes, ma'am. Okay. Okay. FLORIDA PUBLIC SERVICE COMMISSION 1 2 Any other changes? 3 4 All right. CHAIRMAN BROWN: 000051 MS. BROWNLESS: No, ma'am. That would be the only change to the Comprehensive Exhibit List. 5 CHAIRMAN BROWN: 6 MS. BROWNLESS: Okay. At this time, the staff would 7 also request to enter into the record the service 8 hearing exhibits, which are identified within the 9 Comprehensive Exhibit List as Nos. 2 through 27. 10 All right. CHAIRMAN BROWN: Seeing no 11 objections from any of the parties, we will enter into 12 the record the service hearing exhibits, which are Nos. 13 2 through 27 on the Comprehensive Exhibit List. (Exhibits 2 through 27 admitted into the 14 15 record.) Thank you, ma'am. 16 MS. BROWNLESS: 17 Finally, we would ask if the parties have 18 identified any exhibits on the staff's portion of the 19 exhibit list -- 20 CHAIRMAN BROWN: 21 MS. BROWNLESS: Parties? -- which starts on page 22 33 with which they cannot stipulate. 23 MS. CHRISTENSEN: 24 CHAIRMAN BROWN: 25 All right. Commissioner -Let me just get there for a sec. FLORIDA PUBLIC SERVICE COMMISSION 1 Okay. 2 MS. CHRISTENSEN: 000052 Ms. Christensen. Commissioners, as we 3 indicated at the prehearing conference, OPC will not be 4 agreeing to stipulate any part of the discovery portion 5 of the Comprehensive Exhibit List at this time. 6 we agreed to do, as the witnesses appear on the stand 7 and as the exhibits related to that witness are 8 identified as the witness takes the stand, we can take a 9 look at it at that point in time. And as You know, obviously 10 we're preparing to put on our case, and it's quite an 11 extensive Comprehensive Exhibit List. 12 done our best to try and at least make copies of it so 13 we can have it available in paper copy to take a look at 14 as the witnesses come up, but at this time we would not 15 be agreeing to stipulate any of the discovery responses 16 staff has sponsored. 17 CHAIRMAN BROWN: You know, we have Thank you, Ms. Christensen. 18 I did get a chance to watch the prehearing conference, 19 so I heard that objection during that. 20 give me a reason, legitimate reason for not stipulating 21 to staff's exhibits when you've had these discovery 22 responses for a great deal of time, as have all of the 23 other parties? 24 discovery. 25 Can you just In fact, some of these are your own MS. CHRISTENSEN: One legitimate reason is FLORIDA PUBLIC SERVICE COMMISSION 000053 1 because we need to determine how these discovery 2 responses are going to be presented to the witness and 3 how -- what types of questions are going to be asked 4 about those exhibits. 5 be admitted through the witnesses and sponsored. 6 of these exhibits have been created by FPL personnel 7 that are not necessarily people that are testifying here 8 today, so the witnesses will have to adopt those 9 responses. 10 You know, they also will need to Some And I think just as a matter of hearing 11 practice, the appropriate methodology for moving 12 exhibits into the record is to do it through the 13 witnesses that you are requesting sponsor that exhibit, 14 and part of our case is understanding how those 15 documents are intended to be used by the other parties. 16 So for those reasons, you know, and also, you 17 know, this is a stipulation and, frankly, our right is 18 not to stipulate to anything at this point. 19 reasons, we would not be agreeing to stipulate to the 20 discovery at this point in the process, you know, and 21 that's our position. 22 23 24 25 For those Thank you. CHAIRMAN BROWN: Any other parties object to those -- yes, Hospitals. MR. WISEMAN: Thank you, Madam Chair. The Hospitals also will not stipulate, although we would FLORIDA PUBLIC SERVICE COMMISSION 000054 1 agree with OPC that we will at the time the witness 2 takes the stand be ready to stipulate or not as to an 3 exhibit at that point. 4 raised. 5 they're stipulated into the record, there's no context. 6 There may be particular responses, discovery responses 7 that would be stipulated into the record for which 8 there's no witness, and we think that's improper. 9 could be discovery responses that are misleading and But it's the same point that OPC These are discovery responses that are -- if 10 additional discovery -- I'm sorry -- additional 11 testimony would be needed in order to clarify the 12 information that's in those responses. 13 just stipulating them in wholesale is improper. 14 CHAIRMAN BROWN: There So we think that I think those are all fair, 15 reasonable arguments for objecting to a stipulation. 16 But I don't encourage the parties, and since we will be 17 breaking at suppertime, to use that time to see -- to 18 look over those staff exhibits and be able to examine 19 whether or not you can stipulate the next day if you've 20 had an opportunity to review the witness that will be 21 coming on the stand the next day. 22 MR. MOYLE: Madam Chair, just out of an 23 abundance of caution, I don't know if you need to say we 24 object for the purposes of preserving the right -- 25 CHAIRMAN BROWN: Sure, sure. FLORIDA PUBLIC SERVICE COMMISSION 1 MR. MOYLE: -- but we similarly object. 000055 And 2 I'll take 30 seconds and tell you a reason why is I had 3 a judge one time say to me in a court proceeding, 4 "Moyle, Mr. Moyle, if you want me to be aware of 5 something in a document that's this thick, you need to 6 show it to a witness and talk about it. 7 can't just dump a bunch of stuff in the record and in 8 your PRO cite it and want me to go, 'Oh, yeah, I 9 remember that,' because you never brought it up." You know, you That 10 is, I think, the same point that's being made by OPC and 11 the Hospitals and we agree with it. 12 good point. 13 questions, ask them. 14 15 16 We think it's a You've got witnesses here. CHAIRMAN BROWN: If you've got All fair points. I agree. So, yes, Ms. Brownless. MS. BROWNLESS: If I may just talk a little 17 bit about how the staff intends to go about identifying 18 these staff exhibits. 19 Exhibit No. 399 on page 33 of the Comprehensive Exhibit 20 List, we would intend to ask Mr. Goldstein, Mr. Kennedy, 21 and Mr. Miranda about the response to the first set of 22 interrogatories No. 1; ask Ms. Ousdahl to identify the 23 first set of interrogatories 3 through 5, 7 through 9, 24 13, 29 through 31, 36 through 37, 39, 42, 50 through 52, 25 55, and 56; then ask Ms. Slattery about 14 through 28; For example, if you look at FLORIDA PUBLIC SERVICE COMMISSION 000056 1 Mr. Barrett and Ousdahl about 40. We will not be able 2 to move these exhibits into the record until the last 3 witness who has sponsored the responses that are 4 identified in Exhibit No. 399 takes the stand and has 5 authenticated the materials. 6 sure that the parties understood that that is the 7 process that we will use. 8 CHAIRMAN BROWN: 9 MS. CHRISTENSEN: So I just wanted to make Ms. Christensen. Yes. And we understand 10 that. 11 since these are discovery responses, there does have to 12 be some authentication. 13 in hearsay, that there has to be some use or 14 identification that they're either used in the ordinary 15 conduct of affairs, they're not irrelevant, immaterial, 16 or duplicative of other information that's already in 17 the record, or that if they are hearsay, they can't be 18 relied on solely for a finding in this record. 19 wanted to put that on to -- into the record so that we 20 can keep that in mind as these items are being addressed 21 in the documentation. 22 responded to the discovery we don't think will be 23 sufficient to seek to move the exhibits into the record. 24 Thank you. 25 We did want to point out for the record that I mean, there has to be some -- And we Just authenticating that they MS. BROWNLESS: And if I may respond to that FLORIDA PUBLIC SERVICE COMMISSION 1 000057 point. 2 CHAIRMAN BROWN: 3 MS. BROWNLESS: Yes. We will not be able to hear 4 any objections until the last witness sponsoring that 5 exhibit. 6 Chapter 120, hearsay evidence is admissible. 7 admissible if it is the sole evidence. 8 parties believe that the material is hearsay, they need 9 to make an objection when we get to the end and preserve Now the point I want to make is that under It's not If, in fact, the 10 that for the record. 11 each party authenticate as true and correct the 12 responses to their discovery, the part of the discovery 13 that they prepared, is adequate and will preserve the 14 right. 15 And I believe that having the -- CHAIRMAN BROWN: Okay. So, Mr. Moyle, I do 16 want to just stress to the parties, we've already gone 17 over the process, so spending a little bit of extra time 18 on this. 19 amenable to that obviously, since you haven't stipulated 20 (phonetic), so we're going to move along, Mr. Moyle, 21 unless you want to raise a new point. 22 You all have a clear understanding, and I'm MR. MOYLE: Well, I think this may save time. 23 I mean, to the point that Ms. Brownless raised about 24 hearsay, you know, it's in 120 as to what it can be used 25 for. You know, I thought maybe a standing objection to FLORIDA PUBLIC SERVICE COMMISSION 000058 1 hearsay that is coming in that's not corroborated would 2 be an efficient way to deal with that as compared to 3 going through each exhibit and taking a bunch of time, 4 if there would be a willingness to consider that. I would like to go as the 5 CHAIRMAN BROWN: 6 witness enters the stand. 7 object as that happens and make sure those objections 8 are timely. All right. 9 I would like the parties to Moving on to opening statements. 10 We will begin with FPL. I'm just going to go through an 11 overview of your time allocations per the Prehearing 12 Order. 13 Counsel, you have ten minutes. 14 intervenors have five minutes for opening statements. 15 And please remember that there will not be any sharing 16 of time between the parties; however, if the intervenors 17 have a preference of order after we go to OPC, please 18 feel free to address me at that time and let me know. Mr. Butler has 20 minutes. Office of Public All remaining So we're going to start and, as you know, I do 19 20 like to stick with the time. 21 kind of lets you know. 22 about two minutes left. 23 stop you. So this device up here When it gets yellow, you have Unfortunately, you know, I will All right? 24 So when you're ready, please let me know. 25 MR. LITCHFIELD: Madam Chairman, this is Wade FLORIDA PUBLIC SERVICE COMMISSION 1 Litchfield. Before I'm on the clock, I would like to 2 distribute some exhibits because I know that you will 3 cut me off if I exceed my allotted time. 4 CHAIRMAN BROWN: Sorry. 5 MR. LITCHFIELD: And I will absolutely make 6 I will. that mark. 7 CHAIRMAN BROWN: Thank you. 8 MR. LITCHFIELD: We'd like to distribute a 9 000059 series of exhibits. They're all prefiled exhibits in 10 the case, so I'd like to work from those this morning, 11 if I could. Certainly. 12 CHAIRMAN BROWN: 13 (Pause.) 14 I believe everybody has the handout. 15 MR. LITCHFIELD: 16 Then, Madam Chairman, Commissioners, we are ready to move forward. 17 Good morning. 18 CHAIRMAN BROWN: Good morning. 19 MR. LITCHFIELD: And we appreciate the 20 opportunity to be here before you today. You're very 21 familiar with the request that has been filed by Florida 22 Power & Light Company, so I'm not going to spend time 23 describing it for you this morning, but I will summarize 24 it in one simple statement. 25 Commissioners, this is case is about endorsing what has Fundamentally, FLORIDA PUBLIC SERVICE COMMISSION 000060 1 obviously and clearly been working very well. 2 distributed a booklet to you. 3 exhibits filed in this case by FPL witnesses. 4 page is numbered for convenience, and I'm going to refer 5 to the page numbers as opposed to the exhibit numbers. 6 So I've It has several of the And each Starting with page 1, this is an essential 7 frame of reference for the case. It shows the monthly 8 residential bills for all Florida utilities, FPL being 9 the lowest at $97.92 for a typical bill of a thousand 10 kilowatt hours, saving residential customers in 2015, 11 based on 2015 rates, $276 relative to the average. 12 Page 2 shows very clearly the bill progression 13 for 2017 through 2020 for residential customers based on 14 FPL's filed case. 15 if FPL's request is granted, FPL bills will still be 16 $14.34 a month below the average residential bill among 17 all Florida utilities, again, based on their 2015 rates, 18 not even taking into account what increases their bills 19 may see over that same period. 20 So, for example, in January of 2020, Page 3, also a really important reference 21 point, indicates that even with the requested increases 22 over the four-year period, in January 2020, FPL's 23 typical residential bill will be lower than it was in 24 January 2006, 15 years earlier. 25 averages for both Florida and the nation as a whole, and Again, well below the FLORIDA PUBLIC SERVICE COMMISSION 1 000061 again even at those utilities' 2015 rates. Pages 4 through 6 are three exhibits that I've 2 3 pulled from Ms. Cohen's testimony to show you the bill 4 impacts for three different customer classes over the 5 same 15-year period. 6 just us on the key takeaway that I've circled at the top 7 of each of those graphics, and you'll see that if FPL's 8 request is granted, residential bills over that period 9 will have decreased 1.4 percent compared to CPI 10 And I'm really going to focus you increases over the same period of 33 percent. Turning to page 5, it shows a decrease for 11 12 small businesses of 8.6 percent over the same period. 13 And turning to page 6, for large commercial customers, 14 the decrease is 5.1 percent; again, in contrast to a 15 33 percent increase in CPI even if FPL's request is 16 granted. 17 Page 7 is a very interesting graphic. It 18 describes the -- it describes parity, which is a very 19 important principle in ratemaking. 20 as a matter of policy, what we try to do is to have each 21 customer class contribute proportionately the same 22 amount to the utility's authorized return. 23 parity ratio of 100 percent is the targeted outcome for 24 each class, and FPL's proposal over these four years 25 will move rates for all customer classes closer to It simply means that FLORIDA PUBLIC SERVICE COMMISSION And so a 1 000062 parity. So, for example, in the case of the small 2 3 business and residential customers that you see on the 4 left side of the graph, they -- we will do so by 5 lowering their relative contributions. 6 of the larger business customers on the right-hand side 7 of the graph, moving from the blue to the green to the 8 gray, you will see that their contributions necessarily 9 would increase over that period to move them closer to 10 11 And in the case parity. Page 8, this shows FPL's residential bill 12 reductions between 2006 and 2016 relative to other major 13 southeast investor-owned utilities. 14 15 show bill reductions during that same period. 15 others, you see, quite clearly show a very wide range of 16 increases, many in the 30 to the 40 to the 50 percent 17 range over that period of time. 18 every time you hear during this case that FPL's results 19 are simply the result of low natural gas prices, ask 20 yourself two questions. 21 utilities made the conversions or the upgrades to their 22 fleet to take advantage of low gas prices? 23 second question is even for those that have done so, why 24 is it that even with low gas prices, their overall costs 25 continue to increase at rates that exceed FPL? Only three of those The So, Commissioners, First, why have so few other FLORIDA PUBLIC SERVICE COMMISSION And the Turn to 9, if you would, page 9. 1 000063 This is out 2 of Mr. Reed's testimony. And it shows ranked 3 performance relative to ranked situational challenges. 4 And so, for example, on his plotted graph, those that 5 are most challenged utilities plot high on the Y axis. 6 Those that perform the best plot furthest to the right 7 on the X axis. 8 want to be at the very top quadrant or furthest to the 9 right. And so where do you want to be? Look at where FPL is: You The most challenged and 10 yet the best performing, according to his analysis, 11 which has not been contested by any intervenor in this 12 case. Pages 10 and 11 also from Mr. Reed's testimony 13 14 show total non-O&M fuel per customer. 15 is better. 16 analysis is done on the basis of megawatt hours sold. 17 But they both show -- and you look at FPL, the solid 18 blue line, in contrast to the other groups, FPL has 19 performed significantly better over the entire period, 20 and even over the last few years has started to widen 21 the gap. 22 Lower obviously Page 11 shows the same results if the I want to focus you on that dotted line, which 23 relates to the large utilities and that comparison. 24 when you hear from the intervenors again that FPL is 25 simply the beneficiary of scale or economies because FLORIDA PUBLIC SERVICE COMMISSION So Remember that 000064 1 we're so large, remember this graph. 2 dotted line comparison. 3 O&M, so remember this graph when you hear that it's all 4 about low gas prices and FPL has done really nothing. And, again, this is non-fuel Do non-fuel O&M costs matter? 5 Well, the next 6 page show pretty clearly that they do. And JJR-8 on 7 page 12 shows that over just a ten-year period, 8 depending on which comparator group you use, that FPL's 9 customers have saved between 10- and 16 billion dollars. 10 You will not hear that number mentioned by any of the 11 intervenors during the course of this case. Page 13, we're moving into our fossil fleet. 12 13 Ms. Kennedy has got some graphs that I want to cover 14 here. 15 in which we've achieved major improvements. 16 circled three to focus on: 17 O&M per kWh for the fossil fleet, and workforce 18 requirements per megawatt. 19 25 percent, 58 percent, and 78 percent respectively over 20 the relevant period. 21 exhibit have the first thing to do with low natural gas 22 prices. 23 Page 13 shows a number of performance categories I've Fuel efficiency, non-fuel Each of those improved by Again, none of the things on this Page 14 shows the improvements in heat rates 24 that the system has achieved, meaning less energy to 25 produce the same number of kilowatt hours. FLORIDA PUBLIC SERVICE COMMISSION But what I 000065 1 really like about this graph is that it shows the 2 improvements as they relate to discrete decisions by FPL 3 to upgrade or modernize our fleet to high efficiency gas 4 units or to add solar. 5 which has been about 18 years, I have either 6 participated in or supervised many, if not most, of 7 these proceedings in which FPL sought permitting from 8 the Commission. 9 which anybody to my left here was there with us telling During my tenure at the company, I cannot recall a single instance in 10 the Commission this is a good idea. Not one instance do 11 I recall. 12 The Commission, however, approved these projects, and 13 customers are realizing the benefits. I recall a few times where we were opposed. Page 15, tangible customer savings and value 14 15 associated with these decisions since 2001. That 16 $8 billion number that I've circled for you of cost 17 avoidance, again, nothing to do with lower gas prices. 18 It has to do with burning less fuel, not less expensive 19 fuel. Page 16, I really like this graph because what 20 21 it shows very clearly is that had FPL's non-fuel O&M 22 performance in its fossil fleets progressed at the 23 same -- at the rate of inflation, look where we would 24 be. 25 rest of the industry. We would be right there with the pack, with the But look, in fact, where we are. FLORIDA PUBLIC SERVICE COMMISSION 000066 1 To me, this demonstrates a pretty clear emphasis on cost 2 control at Florida Power & Light. 3 Page 17, I've got one exhibit for you for the 4 nuclear division, and I want to focus you on the INPO 5 performance, which has improved dramatically since the 6 last base rate proceeding, but then also the cost per 7 megawatt hour has come down substantially due both to 8 cost control measures within the nuclear division as 9 well as the uprate projects that, again, were so heavily 10 11 contested by some of the folks here to my left. Page 18, we're moving to transmission and 12 distribution. 13 tremendous progress in improving reliability at FPL. 14 You can see the progress that we have made or intend to 15 make on the hardening projects. 16 fact, have 60 percent of the feeders hardened or 17 under-grounded at that point. 18 And Mr. Miranda's organization has made And by 2018, we'll, in What we do know, Commissioners, is our 19 customers want reliability. 20 20, these simply show improvements in SAIDI and 21 improvements in momentaries respectively over that time 22 period as a result of these efforts. 23 You look at pages 19 and And then you would ask, now how do we compare 24 to the region or to the national average? Page 21 will 25 lay that out for you, and it shows that we are FLORIDA PUBLIC SERVICE COMMISSION 000067 1 significantly better than the next best performer, and 2 we are performing in the range of, give or take, 3 50 percent better both on a regional- and a 4 national-based comparison. So does our performance matter to customers? 5 6 Well, we surely think that it does. And pages 22 and 23 7 from Ms. Santos' testimony show very clearly that 8 customer satisfaction scores are really quite 9 exceptional in every category. And again on page 24, it 10 shows how our service has translated into fewer logged 11 complaints with the Florida Public Service Commission. So that's the backdrop that I wanted to frame 12 13 up for you for this case, Commissioners. And with that, 14 I want to turn to page 25, if you could. This is from 15 Mr. Barrett's testimony. 16 think, of illustrating the 2017 revenue requirement 17 need. 18 what it really does is show the additions and then the 19 subtractions that gets you to the actual revenue 20 requirement need. 21 It does an excellent job, I It's called a waterfall exhibit or chart, and On the left you've got capital initiatives. 22 Obviously that's the largest one. And that includes a 23 lot of the projects, the undertakings, the investments 24 that have allowed us to achieve the performance that 25 we've just spent a few minutes talking about. FLORIDA PUBLIC SERVICE COMMISSION The depreciation study. 1 000068 With additional 2 invested capital, we would certainly expect, all other 3 things equal, that depreciation expense is going to 4 increase. 5 as well. 6 building to the revenue requirement need for 2017. 7 mention that because the loss of this mechanism as a 8 result of the end of the settlement is very significant. 9 It, in fact, was a major reason why we were able to 10 11 I'll spend a little time on that in a moment The reserve amortization component also I agree to a lengthy settlement in the last case. And then on the other side of the ledger, I 12 want to focus you on that O&M bar that I've circled for 13 you, and to note that that is the level of savings that 14 we've been able to extract from our base O&M. 15 already best in class, but we didn't rest there. 16 went out and we found additional productivity 17 improvements. 18 requirement request. 19 long period of that settlement that we just are in the 20 process of winding up. 21 We were We That actually lowers our revenue Clearly one of the benefits of a 26, I include that just to show you the four 22 major categories of capital investment that you would 23 expect to see: 24 upgrades, and general capital for system growth. 25 would just note that OPC has challenged only very modest Reliability, hardening, generation FLORIDA PUBLIC SERVICE COMMISSION And I 000069 1 amounts of this capital investment and for reasons that 2 we believe do not withstand scrutiny. So that turns to 27. 3 What -- page 27. What 4 OPC has opposed is the depreciation study. But I want 5 to note something using this exhibit here. It's Figure 6 1. 7 shown on this figure, and this is really important, had 8 FPL simply taken the same depreciation parameters that 9 were approved in 2009 in that docket and applied those 10 to the current plant balances, the depreciation expense 11 actually would have increased by 753 million, not 12 187 million. 13 needed to be $600 million higher. 14 very hard to hold down the incremental annual 15 depreciation expense. 16 Commission is to find acceptable any aspect of Mr. 17 Pous's depreciation study, it should not be for the 18 purpose of finding an arbitrary means to lower FPL's 19 revenue requirement, but rather for the only purpose of 20 deferring or avoiding a second base rate case over the 21 same four-year period similar to how the reserve surplus 22 was used in the past case. 23 It's out of Ned Allis's rebuttal testimony. And as In other words, the request would have FPL has worked very, But I would suggest that if the Pages 28 and 29, I just want to draw your 24 attention to illustrate that the reason for the 25 additional increase in 2018, the subsequent year FLORIDA PUBLIC SERVICE COMMISSION Again, 000070 1 adjustment, again is capital investment. 2 investment that is largely uncontested in this case. 3 And without that adjustment, as Witness Barrett will 4 indicate, we certainly would be back in for another full 5 base rate proceeding as soon as that filing could be 6 prepared. Pages 30 to 35, we're going to roll through 7 8 these fairly quickly. 30 is really just a composite. 9 These are from Mr. Dewhurst's testimony. 30 is a 10 composite of 31 through 35, so I won't spend time on 30 11 but move straight to 31. 12 circled this, is that compared to the other major 13 southeast IOUs, FPL has got the lowest residential bill 14 and, in most cases, it's by quite a wide margin. 15 Page 32 shows non-fuel O&M. And what it shows, and I've Again, FPL most 16 efficient in the region. Page 33, best reliability in 17 the region. 18 satisfaction, but we are gaining ground. 19 6, cleanest again by a wide margin. Page 34, second best in customer So I want to finish with 36. 20 And 35, page That's the last 21 exhibit in your handout. And I want to talk about these 22 four elements that we refer to at FPL as the "virtuous 23 circle." 24 operating philosophy. 25 superior customer value, that that will improve, Very, very important and fundamental to our We believe that if we deliver FLORIDA PUBLIC SERVICE COMMISSION 1 increase, affect directly customer satisfaction. 2 believe that if customer satisfaction is strong, that 3 that is going to help us have a more constructive 4 regulatory environment. 5 more constructive regulatory environment, we will have a 6 strongly financial position. 7 that strong financial position, and you will hear our 8 witnesses testify to this, that is the platform through 9 which, by which we are able to deliver the type of We believe that if we have a And we believe that with 10 service that we've been able to deliver. 11 important. 12 We 000071 Very, very FPL's case and the exhibits that I've 13 highlighted for you this morning demonstrate that this 14 approach has been working exceptionally well for years. 15 Intervenors do not contest two of these elements. 16 don't contest superior value or customer satisfaction, 17 that those are positive, that those are good, we ought 18 to be going after those. 19 though, is to weaken FPL's financial position. 20 you'll hear from FPL witnesses why in our view, in their 21 view this is shortsighted, it is misguided, and 22 fundamentally wrong. 23 They What they do ask you to do, And So we keep hearing from the intervenors that 24 our level is to be expected, even required. 25 Because they say, "Well, you're a regulated monopoly. FLORIDA PUBLIC SERVICE COMMISSION Why? 000072 1 You're supposed to provide this level of service." And 2 yet, Commissioners, by most of the metrics and standards 3 that we benchmark ourselves against, we don't look like 4 a conventional regulated utility. 5 the graphs that we've just walked you through. 6 look like a conventional regulated utility. 7 fact, when we look at ourselves in the mirror, we don't 8 see ourselves as a conventional regulated monopoly 9 utility. Think back to some of We don't And, in We haven't done things in a conventional way. 10 We have taken some innovative steps and worked hard to 11 lead out in areas of performance improvement. 12 been successful in a number of areas and we have work to 13 do in some other areas. We've In short, we have not been satisfied simply to 14 15 show up for a return of and on our investment. So while 16 acknowledging, Commissioners, that we're not perfect in 17 our performance, we still have work to do, we think that 18 our commitment to performance and our commitment to 19 improve our performance certainly distinguishes us in 20 the industry. 21 equity ratio are a little above national averages, maybe 22 there's a really good reason why they should be and why 23 they are and why they have been. 24 this Commission to decide during the course of this 25 case. And so if our return on equity and if our That will be up to But are our customers doing better than average? FLORIDA PUBLIC SERVICE COMMISSION 1 Absolutely they are. 2 than average. 000073 They're doing a whole lot better For these reasons, Commissioners, we think 3 4 this is a very straightforward case for us to present in 5 terms of price, in terms of quality of service, in terms 6 of reliability. 7 customers in the state of Florida and arguably in the 8 nation. 9 straightforward case for you to decide. Our customers are the very best served We think that this is an equally As I stated at 10 the outset, we fundamentally are simply asking the 11 Commission to approve and endorse what has been working 12 so well for our customers. 13 time. 14 CHAIRMAN BROWN: 15 All right. 16 MS. CHRISTENSEN: 17 CHAIRMAN BROWN: 18 And I thank you for your Thank you, Mr. Litchfield. Ms. Christensen, any handouts? No, no handouts. Okay. Sorry. So whenever you are ready. 19 MS. CHRISTENSEN: Okay. Good morning, 20 Commissioners. Patty Christensen for the Office of 21 Public Counsel representing the ratepayers of Florida 22 Power & Light. One word describes FPL's rate request in this 23 24 matter: Excessive. FPL's request for multiple test 25 years and a limited scope proceeding three years from FLORIDA PUBLIC SERVICE COMMISSION 000074 1 now is unjustifiable and excessive. And FPL's 2 826 million base rate increase for 2017 is excessive. 3 The additional 2018 base rate increase for 270 million 4 is even more excessive. 5 mid-2019 increase for the Okeechobee Clean Energy Plant 6 is unprecedented and unwarranted at this time. Finally, the 209 million FPL says that it's not seeking a rate increase 7 8 for 2020 and plans to stay out for four years; however, 9 there's nothing -- there's no prohibition against FPL 10 filing for an increase should its earnings fall below 11 its authorized rate of return range at any time during 12 the four-year period. FPL is also requesting an excessive cost of 13 14 capital. The company is asking for 100 basis points or 15 1 percent point increase over its currently authorized 16 midpoint of 10.5 to increase its ROE to 11.5. 17 includes FPL's requested 50 basis point surplus ROE 18 inflater for what FPL concludes is superior performance. 19 However, FPL customers have already paid and are still 20 paying for all the supposed superior performance in 21 current base rates. 22 benefit from lower rates, yet this is because of more 23 efficient plants for which FPL customers are paying in 24 rates as well as lower natural gas prices, which are 25 lower due to market conditions and which FPL does not This OPC agrees that FPL's customers FLORIDA PUBLIC SERVICE COMMISSION 1 000075 control. FPL has done nothing more than what a 2 3 responsible utility manager should do to ensure fair, 4 just, and reasonable rates under Florida's regulatory 5 compact. 6 OPC has evaluated FPL's petition, the minimum 7 filing requirements, discovery responses, testimony 8 filed in this proceeding, including the testimony filed 9 in the storm hardening plan, incentive mechanism, and 10 the depreciation and dismantlement dockets, which were 11 consolidated with this Florida base rate case. 12 review of these dockets shows that FPL's request in 13 these dockets are more excessive. 14 OPC's OPC has engaged multiple nationally recognized 15 expert witnesses, who have extensively reviewed the 16 information filed in this proceeding to trim these 17 excesses to a reasonable revenue requirement. 18 result, OPC has identified four principle areas for 19 these adjustments: depreciation, revenues, capital 20 structure, and return on equity. 21 As a Mr. Jack Pous is OPC's depreciation expert 22 with 40 years of experience. Mr. Pous has reviewed 23 FPL's depreciation study. 24 FPL's requested increase of 195 million in depreciation 25 expense is materially overstated. His review demonstrates that Mr. Pous recommends FLORIDA PUBLIC SERVICE COMMISSION 000076 1 more realistic parameters for many of the depreciation 2 accounts. 3 would generate a total company depreciation 4 over-collection of 923 million, which he recommends be 5 flowed back to current customers over four years. If adopted, Mr. Pous's recommended rates The sum of Mr. Pous's adjustments results in a 6 7 reduction to FPL's 2017 revenue requirement of 280 8 million for new lower depreciation rates, and an 9 additional 221 million in flowback to customers in 2017 10 for excess depreciation reserves on a jurisdictional 11 basis. Dr. David Dismukes is OPC's expert witness on 12 13 incentive mechanism and forecasting. 14 reviewed FPL's sales forecast for the 2017 and '18 base 15 rate cases. 16 load forecast that FPL used for a Ten-Year Site Plan and 17 it's Okeechobee need determination case with the 18 forecast that FPL is now proposing be used in this rate 19 case, Dr. Dismukes has determined that FPL's rate case 20 forecast significantly understates revenues in the test 21 years. 22 proposed rate case forecast and employ the 2015 NEL 23 forecast previously used by the Commission to approve 24 the Okeechobee need determination for FPL. 25 Dr. Dismukes has After comparing the 2015 net energy for He recommends that the Commission reject FPL's Adopting the 2015 NEL forecast will decrease FLORIDA PUBLIC SERVICE COMMISSION 000077 1 the company's revenue request by 206 million in 2017 and 2 259 million in 2018. 3 that FPL's proposed incentive mechanism with its changes 4 should not be approved, and the 2012 incentive mechanism 5 should be allowed to lapse. 6 Commission's longstanding and proven gain on sales 7 mechanism. FPL should revert to the Kevin O'Donnell, a chartered financial 8 9 Dr. Dismukes will also testify analyst, is OPC's expert who testifies about capital 10 structure. 11 equity ratio request of 59.6 percent equity. 12 Mr. O'Donnell will testify, FPL's request in this case 13 puts an unnecessary and costly burden on FPL ratepayers, 14 an extra $40.97 per year for a typical residential 15 customer. 16 reasonable. 17 Mr. O'Donnell addresses FPL's excessive As And this is not warranted or fair or Mr. O'Donnell's examination of capital 18 structure demonstrates that FPL's proxy group average 19 equity ratio used by FPL's own expert is 49.3 percent, 20 and the national average for the allowed equity ratio is 21 49 percent. 22 hypothetical capital structure of 59.6 percent equity, 23 Mr. O'Donnell recommends a more rational hypothetical 24 capital structure of 50 percent equity. 25 50 percent equity ratio, which is in line with industry Rather than use FPL's proposed unreasonable Applying a FLORIDA PUBLIC SERVICE COMMISSION 1 averages, results in approximately $337 million 2 reduction to FPL's 2017 request. 000078 Dr. Randy Woolridge is OPC's expert witness 3 4 who testifies on return on equity. Dr. Woolridge has 5 evaluated FPL's requested ROE in light of current market 6 conditions and the changes that have occurred since the 7 last -- FPL's last rate case. 8 11 percent ROE, especially with its requested 9 59.6 percent equity ratio, is excessive under current FPL's requested 10 market conditions. Dr. Woolridge testifies that both 11 interest rates and awarded ROEs around the United States 12 have decreased since 2012. 13 discounted cash flow method checked by the asset -- 14 Capital Asset Pricing Model and used OPC's proposed 15 capital structure of 50 percent and a comparable 16 electric proxy group to determine that the appropriate 17 ROE for FPL is 8.75 percent. 18 will result in approximately a $560 million reduction 19 from FPL's 2017 request. Dr. Woolridge applied the Using an 8.75 percent ROE 20 OPC's other experts have additional 21 adjustments based on their thorough examination of FPL's 22 request. 23 long-time witness before this Commission, recommends 24 reductions to FPL's increase in unneeded new employee 25 positions and storm hardening-related expenses, as well Bill Schultz, who is a CPA from Michigan and FLORIDA PUBLIC SERVICE COMMISSION 1 000079 as other adjustments. 2 Ralph Smith, who is also a CPA from Michigan 3 and a long-time witness before regulatory commissions, 4 testifies to accounting adjustments and revenue 5 requirements. 6 case expense, tax-related costs, and generation overhaul 7 expense, as well as other adjustments. 8 9 Mr. Smith recommends reductions for rate Mr. Dan Lawton, economist and attorney, testifies about FPL's financial integrity and surplus 10 ROE inflater. 11 Commission were to implement all of OPC's recommended 12 adjustments in this docket, FPL will maintain its 13 financial integrity. 14 not be given the 50-basis-point surplus inflater, not 15 only because it's not warranted, but it's also nothing 16 more than paying a premium on service sufficiencies that 17 the customers have already paid for and for lower 18 natural gas prices. 19 Mr. Lawton will validate that if this He also testifies that FPL should Based on this extensive expert review, OPC has 20 determined that a rate decrease of 870 million is 21 appropriate for 2017, and that no rate increases are 22 needed for '18 or for the Okeechobee limited scope 23 adjustment in '19. 24 hearings, the Commission will also conclude that FPL's 25 excessive rate request needs to be dramatically cut. We believe that at the end of the FLORIDA PUBLIC SERVICE COMMISSION We 000080 1 believe that based on all the evidence, the Commission 2 will also determine that OPC's recommended rate decrease 3 of 807 million for 2017 with no 2018 or '19 increases is 4 the fair, just, and reasonable result in this matter. 5 Thank you. 6 CHAIRMAN BROWN: 7 All right. The next -- I don't know which 8 order is your preference. 9 with the intervenors? 10 11 12 13 14 MR. MOYLE: Thank you, Ms. Christensen. Does anybody have an order Anyone want to go first? We had talked about going down the line this way, if that's all right, with OPC. CHAIRMAN BROWN: don't you? Okay. I could have seen that. All right. So you have five minutes, although 15 you do not have to use all of it. 16 know when your time has expired. 17 MR. COFFMAN: 18 please the Commission. 19 You want to go last, And I will let you Thank you very much. May it Again, this is John Coffman appearing on 20 behalf of AARP and it's 2.8 million members here in the 21 state of Florida, many of whom are in the South Florida 22 area and customers of Florida Power & Light. 23 Affordability for essential services including 24 electricity is a top priority for AARP Florida, and we 25 are pleased to be here. The -- we are here to ask that FLORIDA PUBLIC SERVICE COMMISSION 000081 1 you take into very serious consideration the impact of 2 your decision today on residential customers, on the 3 citizens of the state. 4 dozens and dozens of witnesses and exhibits detailing 5 the utility's exhibits, and yet your job here is to 6 balance the utility's interest and its shareholders 7 again the customers and the other public interests. 8 so I know it's sometimes hard to do as we delve into the 9 details of the utility, but I would ask that you take 10 that seriously and look at the impact that this case 11 will have. And you have before you just And We believe that the evidence, after having 12 13 reviewed it, is very strong in support of a rate 14 decrease. 15 current rates, and we would ask that you would take into 16 strong consideration the Office of Public Counsel's 17 evidence. 18 present, Mike Brosch, who has decades of experience in 19 the utility regulatory field, having also testified to 20 Florida. 21 isn't a lot of dispute about the prudence of the capital 22 investments that are being proposed here, but it's the 23 issues of return on equity and capital structure that 24 are worth just hundreds and hundreds of millions of 25 dollars, and that is the profit that is left on the $800 million a year is excessive based on the We have our own witness that we will also And when you look at the evidence here, there FLORIDA PUBLIC SERVICE COMMISSION 1 table after the utility does what it's supposed to do 2 and is providing adequate service. 000082 And so we would ask that you very carefully 3 4 scrutinize the request for a double digit return on 5 equity. 6 few years as far as public utility commissions are 7 concerned. 8 8.75 return and definitely something that's not in the 9 double digits. It is far out of the mainstream over the last We support the Office of Public Counsel's A 59 percent capital structure we think 10 is also very excessive, very on the outside of what is 11 reasonable from around the country. We also oppose the pre-approval of a piecemeal 12 13 adjustment for the Okeechobee power plant. It is still 14 quite a ways down the road. 15 projections of the future test years that they have 16 proposed, our witness, Mr. Brosch, will explain why we 17 think that the credibility of this should be called into 18 question. 19 reliable the numbers are. 20 should look at the projections that this utility has 21 made in the past to address the credibility of what they 22 have proposed here. And with a lot of the The closer to the present time, the more And we also think that you AARP is not generally in favor of multiyear 23 24 plans. We have not had good experiences with them and 25 would caution against locking rates in, locking rate FLORIDA PUBLIC SERVICE COMMISSION 000083 1 increases in for too long of a period. We favor a much 2 shorter period and would prefer that you just approve a 3 rate decrease or a rate change for one year. The other issue that we believe strongly in 4 5 with regards to the rate design within the residential 6 class is the customer charge, and we have a strong 7 preference for leaving the fixed customer charge where 8 it is. 9 the cost study is, but we also believe that there are 10 strong policy reasons for leaving the fixed charge as 11 low as you can have it. 12 control over monthly expenses and the ability to get the 13 biggest financial payback for conservation and energy 14 efficiency. 15 that AARP members tell us about. 16 And we have a difference of opinion as to what And the reasons include just We found that that's a very popular issue And so we would ask once you get down to 17 designing the rates, that you leave the customer charge 18 where it is, and that as you review all these important 19 decisions, that you not grant any rate change higher 20 than it needs to be, and that you keep in mind the 21 senior citizen who may be living alone or in a small 22 home and has low usage and is doing everything that they 23 can to keep their monthly bill under control, and 24 hopefully grant a rate decrease. 25 CHAIRMAN BROWN: Thank you very much. Thank you very much. FLORIDA PUBLIC SERVICE COMMISSION 1 Mr. Wright, Retail Federation. 2 MR. WRIGHT: Thank you, Madam Chairman. 000084 Good 3 morning, Commissioners. On behalf of the Florida Retail 4 Federation and our more than 8,000 members, many of whom 5 are Florida Power & Light customers, thank you for the 6 opportunity to address you. 7 The Retail Federation represents our members, 8 but we also take very seriously the responsibility that 9 while we don't specifically and technically represent 10 individuals the way our Public Counsel does, we must 11 speak on behalf of our customers, the real people who 12 shop in our stores every day. 13 doing this a long time, including my service on the 14 Commission staff from 1982 until late 1988, and so you 15 won't be surprised when I bring some historical 16 perspective to bear on this case. 17 Now y'all know I've been The real issue in this case is 18 straightforward: What level of revenue requirements and 19 what rates you should approve for FPL that will enable 20 it to fulfill its responsibility of providing safe and 21 reliability service at the lowest possible cost while 22 being able to pay all its bills, pay all its employees, 23 pay all it debt service, and still raise sufficient 24 capital while providing an opportunity to raise a 25 reasonable rate -- earn a reasonable return on its FLORIDA PUBLIC SERVICE COMMISSION 1 2 000085 equity investment. Now here's some specific history that's 3 relevant to this specific FPL rate case. According to a 4 Commission report, revenue reductions and increases 5 ordered by the Florida Public Service Commission from 6 1960 to present, FPL's rates have been reduced many 7 times, including 1988, '89, '90, '91, '99, and 2002, and 8 FPL has given customers revenue sharing refunds in 2000, 9 2001, 2002, and 2003. FPL has also increased its rates 10 pursuant to GBRA or GBRA-type increases several times. 11 There's been exactly one case in the last 31 years in 12 which the Commission voted issue by issue to decide a 13 general rate case for FPL. 14 2010, Docket 080677. 15 needed increases much like those it has requested in 16 this case. 17 That was in 2009, voted in FPL filed MFRs asserting that it In the 2009 case, they asked for a billion 18 dollars a year for 2010. Here they're asking for 19 $826 million in 2017. In 2009, they asked for an extra 20 247 million for 2011. Here they're asking for 21 270 million in the next year. 22 plant, GBRA, the West County 3, in July of 2011 for 23 $182 million a year, very comparable to the request for 24 Okeechobee of $209 million in this case. 25 request in 2009 was $1.5 billion, just under. They asked for a new The total FLORIDA PUBLIC SERVICE COMMISSION In this 000086 1 case, it's just north of $1.3 billion a year. The 2 Commission, in January of 2010, determined that Florida 3 Power & Light could continue providing safe and reliable 4 service, pay all its employees, pay all its bills, and 5 have an opportunity to earn a reasonable return on its 6 investment with a one-time rate increase in 2010 of 7 approximately $76 million per year, no second-year step 8 increase, and no subsequent increase for West County 3. With help from the consumer parties supporting 9 10 a 2011 settlement, FPL operated with a base rate freeze 11 at the levels ordered by the Commission in January of 12 2010 from 2010 until 2013, yet FPL throughout this 13 period provided safe and reliable service, paid its 14 bills, paid its employees, and was able to raise 15 sufficient capital to make all needed investments. 16 during this period, FPL's stock price increased 17 steadily. 18 according to its earnings surveillance reports filed 19 with this Commission, it consistently earned at the top 20 of its authorized range, 11 percent on a PSC-adjusted 21 basis throughout the entire three years. 22 preponderance of evidence in this case demonstrates that 23 FPL can fulfill all of its responsibilities with no 24 increase in rates at all and, in fact, with significant 25 reduction in rates somewhere between 200 odd and 800 odd And It's increased its dividends every year. And The vast FLORIDA PUBLIC SERVICE COMMISSION Even if the Commission froze 000087 1 million dollars a year. 2 FPL's rates at current levels, FPL's own MFRs show that 3 with no increase in 2017 and even assuming FPL's 4 understated sales forecast, FPL can pay all its bills 5 and all its employees and support its investment in 2017 6 and still have net operating income of $1.6 billion. 7 Even with a rate freeze, they don't need an increase in 8 2017, 2018, 2019, probably not 2020 either. 9 service is indeed valuable, but we customers have Their 10 already paid for that value, and FPL simply does not 11 need anymore customer money. Now why is this history relevant? 12 Because the 13 utilities, and this is shown in your report, the 14 utilities always ask for way more than they need. 15 Sometimes they resist decreases but then agree to 16 decreases or rate freezes in settlements. 17 Commission orders them or grants small increases. 18 the utilities always continue to provide safe and 19 reliable service, pay their bills and raise needed 20 capital. 21 CHAIRMAN BROWN: 22 MR. WRIGHT: This case is no different. requested increases are overreaching. 24 them. FPL's You should reject Thank you very much. CHAIRMAN BROWN: But Thirty seconds. 23 25 Sometimes the Thank you, Mr. Wright. FLORIDA PUBLIC SERVICE COMMISSION 1 All right. Mr. Skop, the Larsons. 2 MR. SKOP: Thank you, Madam Chair. 3 000088 Nathan Skop appearing on behalf of the Larsons. The FPL rate request before the Commission 4 5 represents one of the largest electric rate increases in 6 Florida's history. 7 majority of the FPL request is excessive and 8 unjustified. 9 forced to pay higher electric rates in order to fuel FPL The Larsons believe that the Hardworking Florida families should not be 10 profits. 11 deny the majority of the FPL request based upon the 12 record evidence in this docket. 13 Accordingly, this Commission should properly Conceptually the arguments that FPL has 14 advanced in support of this excessive and unjustified 15 rate request are the same fundamentally flawed arguments 16 that FPL made during the 2009 rate case that was denied 17 by the Commission. 18 claims of customers having low bills does not provide a 19 legal basis for granting the substantial rate increase 20 requested by FPL. 21 be determined using the record evidence in this docket 22 rather than public relations and advertising campaigns. 23 Separating fact from fiction, FPL Fair, just, and reasonable rates must Additionally, FPL uses the same 2009 rationale 24 to state that even if the entire rate increase was 25 approved, customer bills would still be lower than a FLORIDA PUBLIC SERVICE COMMISSION 000089 1 carefully selected point in the past. 2 oversimplification takes advantage of currently low 3 natural gas prices, while ignoring FPL's heavy 4 dependence on natural gas-fired generation and the 5 resulting bill impact if natural gas prices increase 6 above current levels. 7 Undoubtedly this Furthermore, the FPL claims that FPL requires 8 a higher return on equity to continue to be able to make 9 investments are also completely without merit. Not only 10 does FPL have the obligation to serve its customers 11 under the regulatory compact which grants it a monopoly, 12 but the record evidence in this docket will clearly 13 demonstrate that FPL has made billions of dollars of 14 investments at substantially lower midpoint ROE, which 15 has remained constant ever since the Commission lowered 16 the ROE in the 2009 rate case. 17 FPL is financially healthy and does not need a 18 higher ROE to continue to provide safe, adequate, and 19 reliable service to its customers. 20 request for FPL customers to pay for a new corporate 21 jet, the 2016 FPL rate request also has many parallels 22 to the 2009 rate case that was denied by the prior 23 Commission. 24 25 Although lacking a The 2009 rate case requested the largest electric rate increase in Florida's history. FLORIDA PUBLIC SERVICE COMMISSION Based upon 000090 1 the record evidence, PSC staff recommended denying 2 approximately 900 million of the $1.4 billion request 3 before it reached the bench for decision. 4 the midpoint ROE to 10.5 percent and requiring FPL to 5 utilize surplus depreciation, the Commission rendered a 6 decision which kept FPL financially healthy, while 7 denying the majority of the unjustified request which 8 would have significantly increased electric rates during 9 the greatest economic recession since the Great 10 By lowering Depression. FPL was outraged over the decision, claiming 11 12 terrible things would happen. 13 the decision, however, history had proven the Commission 14 clearly made the correct decision as evidenced by the 15 fact that FPL reported record earnings. 16 raise capital at attractive interest rates, and its 17 parent company significantly increased its quarterly 18 dividend payment. 19 claimed would happen as a result of the Commission 20 failing to grant the 2009 rate increase never came to 21 fruition. 22 Less than a month after FPL was able to All the terrible things that FPL The 2010 settlement subsequently affirmed the 23 Commission's decision in all material aspects, including 24 a midpoint ROE of 10.5 percent. 25 use of surplus depreciation as effective, being able to FPL also embraced the FLORIDA PUBLIC SERVICE COMMISSION 1 manage ROE within the upper end of the range as 2 evidenced by the 2010 and 2012 settlements. 3 000091 In the wake of denying the largest unjustified 4 electric rate increase in Florida's history, however, 5 four Commissioners were summarily purged from the 6 Commission. 7 veteran, unquestionable integrity, who was well 8 respected by PSC staff, was forced to resign and 9 replaced with a former PSC Commissioner who was fined by Next, the executive director, a 35-year 10 the Ethics Commission for allegedly accepting a gift 11 from a regulated company when he was a Commissioner. 12 Finally, completing the transition, the division 13 director for accounting and finance, a 25-year veteran 14 of unquestionable integrity, who was also equally well 15 respected by staff, was allegedly forced to resign by 16 the new executive director. 17 Since these changes, the Commission has 18 routinely approved nearly every FPL request, no matter 19 how unreasonable. 20 proceeding, which the Commission was recently overturned 21 by the Florida Supreme Court, exemplifies the PSC 22 shifting significant financial risk to FPL customers to 23 the benefit of FPL over the objection of the Office of 24 Public Counsel. 25 ROE that FPL would have earned on this investment in the The Woodford project at issue in this Simple math illustrates the cumulative FLORIDA PUBLIC SERVICE COMMISSION 1 000092 near term -- 2 CHAIRMAN BROWN: 3 MR. SKOP: Thirty seconds. -- larger than the expected savings 4 the FPL customers would have received over the life of 5 the project. 6 comes to the Florida Public Service Commission, the 7 greed of FPL apparently has no boundaries. 8 9 Indeed, the Larsons believe that when it In closing, the Larsons believe the majority of the FPL request is excessive and unjustified. 10 Hardworking families should not be forced to pay higher 11 electric rates in order to fuel FPL profits. 12 record evidence established that FPL has failed to meet 13 its burden supporting the request, this Commission 14 should properly deny such request. 15 CHAIRMAN BROWN: 16 All right. 17 MS. ROBERTS: Where the Thank you. Thank you, Mr. Skop. Moving on to Wal-Mart. Good morning, Commissioners. 18 Again, my name is Stephanie Roberts, and I'm here on 19 behalf of Wal-Mart Stores East, LP, and Sam's East, 20 Incorporated. 21 Throughout the state of Florida, Wal-Mart has 22 223 super centers, ten discount stores, 75 neighborhood 23 markets, 48 Sam's Clubs, and eight distribution centers. 24 Clearly it is a large user of power throughout the state 25 of Florida, and with FPL they have 650 million-kilowatt FLORIDA PUBLIC SERVICE COMMISSION 000093 1 hours annually. And it is for this reason that Wal-Mart 2 has intervened in this docket, and we appreciate the 3 Commission's and the staff's time in allowing this 4 intervention. Wal-Mart has intervened on four specific 5 6 limited issues as set forth in Steve Chriss's testimony. 7 Mr. Chriss is the senior manager for energy regulation 8 analysis for Wal-Mart, and he will be joining us next 9 week. He has testified before this Commission. And the 10 issues about which he is going to testify are, first, 11 the need to balance FPL's requested revenue increase in 12 ROE, and has suggested that the revenue increase in ROE 13 be denied and certainly be set at no higher than 14 10 percent. FPL's proposal to allocate production capacity 15 16 cost is the second issue Mr. Chriss will be addressing, 17 and he has requested that, and Wal-Mart is requesting 18 that the Commission deny the application for a 12CP and 19 25 -- excuse me -- percent energy methodology. 20 Mr. Chriss's testimony offers alternative approaches, 21 including the current approach, which is the 12CP and 22 1/13th methodology that's used. Mr. Chriss also addresses rate design for 23 24 certain schedules, which are GSLD-1, GSLDT-1, GSD-1, and 25 GSDT-1. FLORIDA PUBLIC SERVICE COMMISSION 000094 And finally, Mr. Chriss will address the 2019 1 2 Okeechobee LSD, and has asked that if the Commission 3 approves that LSA for rate schedules that contain demand 4 charges, that the increase to those schedules should 5 only be applied to the demand charge. 6 CHAIRMAN BROWN: 7 Hello. 8 MS. CSANK: 9 Thank you. Thank you. Sierra Club, Ms. Csank. Madam Chair, Commissioners, Diana Csank appearing on behalf of the Sierra Club and its 10 30,000 Florida members, many of whom are FPL customers. 11 Sierra Club joined this proceeding to protest 12 FPL's $1.25 billion gas combustion turbine cost. As you 13 know, Florida has a natural gas overreliance problem. 14 Just weeks ago, Commissioners voiced their impatience to 15 solve this problem, and the Commissioners are right. 16 There is no time to lose. 17 the line. 18 large and small, to them, natural gas price shocks are a 19 real ongoing threat because FPL built and continues to 20 grow an outsized natural gas-burning power plant fleet. 21 Customers lost billions of dollars on financial hedging 22 programs for gas plants across Florida on top of the 23 billions they pay FPL to build and maintain these 24 plants, and customers are on the hook to pay billions 25 more if the Commission does not prevail on FPL to stop Billions of dollars are on The money of Floridian families, businesses FLORIDA PUBLIC SERVICE COMMISSION 000095 1 growing its reliance on natural gas and finally to start 2 adding, in earnest, clean, low-cost, low-risk 3 alternatives instead: solar, wind, energy efficiency, 4 and battery storage. 5 price volatility, to achieving a balanced mix of energy 6 resources. 7 Even FPL witnesses admit this. 8 prefiled testimony on the company's three new solar 9 power plants. These are the solutions to gas And at today's prices, they are a bargain. For instance, in their And NextEra, FPL's affiliate, is the 10 world's leading solar and wind power developer, rapidly 11 advancing battery storage projects and divesting from 12 natural gas plants. 13 What is FPL doing? Why is FPL still on a gas 14 plant building spree? 15 request here includes natural gas combustion turbines 16 that add up to more megawatts than any of the last four 17 natural gas combined cycle need proceedings. 18 turbines also cost $1.2 billion, as I mentioned before. 19 Astoundingly, the company's These gas This includes, number one, the $800 million 20 gas peaker projects. These are seven large new 21 combustion turbines. Number two, the $450 million 22 existing gas plant expansion projects. 23 changes to the 26 existing combustion turbines to yield, 24 in FPL's words, more megawatts, gas-burning megawatts. 25 Together, the peaker and expansion projects amount to These are FLORIDA PUBLIC SERVICE COMMISSION 000096 1 approximately 2,000 megawatts of gas-burning power 2 plants and that much more exposure for FPL's customers, 3 especially as these plants are supposed to help keep the 4 lights on for the next 30 years, and we can't bank on 5 natural gas prices staying low for that long. 6 To be clear, the projects that I just 7 described are on top of the 13,000-megawatts of natural 8 gas-burning power plants that FPL has added since 2001. 9 To put this in perspective, today FPL has only 10 110 megawatts of solar online. The company's request 11 here includes adding 220 megawatts of solar this year 12 for a total of 330 megawatts, a fraction of 1 percent of 13 the company's generation. 14 level of investment in a market where solar generation 15 additions are beating natural gas additions elsewhere. 16 Indeed, the Sierra Club advocates across the This is a devastatingly low 17 country in electric utility regulatory proceedings, and 18 the experience of other states and even municipal 19 utilities here in Florida, including Tallahassee, shows 20 that ramping up clean, low-cost, low-risk alternatives 21 helps keep rates down, defers the need for billion 22 dollar gas plants, and defends against the risks 23 associated with these gas plants. 24 25 So, again, Sierra Club is in this proceeding specifically to protest the gas combustion turbines and FLORIDA PUBLIC SERVICE COMMISSION 000097 1 requests that the Commission deny FPL's request to 2 recover for them. 3 of whether the turbines are even properly before the 4 Commission instead of in a resource planning docket, a 5 fuel clause docket, or environmental docket. 6 second, assuming for the sake of argument that the 7 turbines are properly before the Commission in this 8 proceeding, FPL has not shown that they are the prudent 9 choice. First, there's the threshold question FPL has not looked at alternatives. And FPL 10 contends that there is no resource planning issue in 11 this proceeding, but that trivializes the -- 12 CHAIRMAN BROWN: 13 MS. CSANK: Thirty seconds. -- $1.25 billion of its customers' 14 money that is going towards these plants. 15 claims of taking a long-term view and wanting to 16 preserve flexibility, the company did not look at any 17 options to proceed more incrementally to phase out 18 existing gas plants according to their age and 19 efficiency and to add new energy resources that are 20 least cost. 21 claims it needs to maintain a certain level of -- 22 23 And let's be clear on one point. CHAIRMAN BROWN: FPL Ms. Csank, your time is done. Thank you. All right. 24 25 Despite Moving on to Federal Executive Agencies. FLORIDA PUBLIC SERVICE COMMISSION 1 MR. JERNIGAN: 000098 Thank you, ma'am, 2 Commissioners. 3 the Federal Executive Agencies. 4 who are not familiar, in Florida that means I represent 5 the Air Force, NASA, Navy, and your tax dollars. 6 what we are here and what I travel around the country to 7 do is to ensure that those tax dollars are spent in a 8 reasonable fashion such that they are able to accomplish 9 their mission. 10 My name is Thomas Jernigan. I represent And for those of you And Every dollar that we spend on utilities is a 11 dollar that comes out of our training, our budget for 12 training and equipment for launching our launches out of 13 Cape Canaveral or Patrick Air Force Base, or just making 14 sure our reservists down at Homestead Air Force Base are 15 ready to go. 16 going on in the country and then I look at the case that 17 has been presented to you, I have to agree with my 18 colleagues to my left and right. 19 today is excessive, and that's going to have an impact. 20 I also look at another guiding principle when And so when I go out and look at what's What we're hearing 21 I travel around. It's that regulation exists to 22 substitute for competition. 23 is a monopoly that has no competition. 24 today are here to ensure that in the absence of that 25 competition, they are still held accountable and are This is a monopoly. This And you here FLORIDA PUBLIC SERVICE COMMISSION 000099 1 here to -- given a reasonable opportunity to operate and 2 recover their costs and a reasonable opportunity to make 3 a profit, not a guarantee. 4 today is a guarantee. 5 was that you'll hear that they're a little above the ROE 6 in the nation, that they're a little above on capital. 7 What you'll hear in the testimony is that the national 8 average is around 9.5. 9 ROE. What they've asked for here What you've heard from FPL today They've asked for 11.5 on our For capital, it's around 50 percent. They're at 10 60/40. Those are excessive, and that excess comes at a 11 detriment to your tax dollars and to the people who are 12 paying those bills. 13 they need to do, and that's provide safe and efficient 14 electricity. And it's not necessary for what Thank you. Thank you, Mr. Jernigan. 15 CHAIRMAN BROWN: 16 Hospital Association, Mr. Wiseman. 17 I didn't start it yet. 18 MR. WISEMAN: 19 CHAIRMAN BROWN: 20 MR. WISEMAN: Thank you. You're welcome. Thank you, Madam Chair and 21 Commissioners. 22 Hospital and Healthcare Association. 23 Ken Wiseman for the South Florida Among the number of misstatements that 24 Mr. Litchfield made was his actual opening statement 25 when he said that this case is about endorsing what has FLORIDA PUBLIC SERVICE COMMISSION 000100 1 been working well. What he should have said is that at 2 least from FPL's perspective what this case is -- this 3 is about endorsing what's been working well for FPL. 4 The fact is this is a rate case that should not have 5 been filed. 6 surveillance reports, FPL has been earning an 7 11.5 percent return on equity for four years now. 8 is -- it's not just a little above the national average. 9 It's way above the national average. If you go back and you look at the That FPL is doing fine 10 it's return on equity is exorbitant, and it certainly 11 did not need to come into this Commission and ask for an 12 increase in that return on equity. 13 Let's talk about capital structure. 14 has proposed in this proceeding that FPL have a capital 15 structure of 50 percent equity ratio. 16 Mr. Litchfield's statement, SFHHA is not attempting and 17 has no interest in FPL not maintaining its financial 18 integrity. SFHHA wants FPL to maintain its financial 19 integrity. A 55 percent equity ratio does that. 20 the capital structure on the circumstances that exist 21 today, not the circumstances that existed seven years 22 ago. 23 Now SFHHA Contrary to Base Now I want to get to cost of service 24 allocation issues. As you know, all of you 25 Commissioners know, for over 30 years FPL has had in FLORIDA PUBLIC SERVICE COMMISSION 000101 1 place a 12CP and a 13th methodology for allocating the 2 cost of production plant. 3 you, know, over the last 15 years SFHHA has opposed 4 that. 5 adds capacity to its system, it's adding it only for one 6 reason, and that's to be able to satisfy its reserve 7 margin requirements associated with its summer peak 8 demand. 9 FPL to need to add capacity to its system to meet that As most of you, if not all of It's opposed it for one reason: Because when FPL Large commercial class customers do not cause 10 demand. 11 going to show, again contrary to Mr. Litchfield's 12 statement, that the parity results that he presented are 13 skewed. 14 to be honest, that -- large commercial class customers 15 are subsidizing other customers who are not paying for 16 the capacity that FPL installs to serve their needs. 17 But in this case, FPL is proposing 12CP and 25 percent, 18 which would exacerbate the problem. 19 The evidence will show that. The evidence is In fact, with the 12CP and 1/13th methodology, We could be here supporting a 1CP method as we 20 have in the past. 21 Commissioner, you know what -- you've -- you know what 22 the 12CP and the 13th methodology is. 23 effect for 30 years. 24 Just maintain it. 25 We're not. We're saying to the It's been in It's middle of the road here. I want to talk about minimum distribution FLORIDA PUBLIC SERVICE COMMISSION We know you've rejected it in the past, 000102 1 system, MDS. 2 but to be honest, I think it's been unfairly 3 characterized here based upon an assumption that it 4 means FPL would install facilities to serve zero load. 5 That is not MDS. 6 disputed, is that to connect the customer to the 7 distribution system, you have to put in facilities. 8 need poles, you need transformers, you need conductors. 9 Cost causation principles should follow -- or cost MDS assumes something that cannot be You 10 responsibility should follow cost causation. MDS does 11 that. 12 facilities to be installed to simply connect them to the 13 system to pay for those facilities. 14 asking -- we know you've approved MDS -- It attributes to the customers who cause those 15 CHAIRMAN BROWN: 16 MR. WISEMAN: And so we're Thirty seconds. -- in the context of the TECO 17 settlement, in the context of Gulf Power's settlement. 18 We're asking you to look at it again here and approve it 19 in the context of this litigated proceeding. 20 very much. Thank you Thank you. 21 CHAIRMAN BROWN: 22 Mr. Moyle, FIPUG. 23 MR. MOYLE: Thank you. Thank you, Madam 24 Chairman. And for the record, Jon Moyle on behalf of 25 the Florida Industrial Power Users Group. FLORIDA PUBLIC SERVICE COMMISSION 000103 The Florida Industrial Power Users Group are 1 2 large users of electricity that often go 24/7. 3 electricity is a very big variable component of their 4 business. 5 internationally. 6 big deal. 7 hear me ask questions about CILC. 8 for large industrials. 9 So A lot of them compete nationally and So when a rate case comes in, it's a And that's who I'm representing, and you'll That's a rate class There's a saying about the best defense is a 10 good offense, and I think that's what this case 11 represents. 12 Mr. Wright and Mr. Skop about past Commission 13 proceedings and how there have been situations where 14 rate reductions were in order, or the case Mr. Skop 15 referred to, there was a small rate increase. 16 the point has been made, FPL has been doing very, very, 17 very well, and you have the Office of Public Counsel 18 presenting evidence to you that a more than 800 million 19 reduction is in order. 20 witness and evidence saying you should reduce rates by 21 $200 million. 22 You got a little bit of history from But as You have the Hospitals with a So, you know, FIPUG's view is, well, if that's 23 the facts on the grounds as it relates to the 24 intervenors, let's come at it with an aggressive ask. 25 And FPL surely has come at it with an aggressive ask -FLORIDA PUBLIC SERVICE COMMISSION 1 more than $1.3 billion. And it's not like it's a 2 one-shot deal. 3 826 million in '17. 4 for 270 million. 5 200 million, 209 million. 000104 They want 220 -- I'm sorry -Then they come back in 2018 and ask And then in 2019, they want another You would think after the last rate case 6 7 settlement, FPL, as Mr. Wiseman said, they're earning at 8 the top of the range, that maybe the ratepayers could 9 have had a little relief before FPL came in to ask for 10 the next rate case. That's not the case. The existing 11 settlement agreement expires on December 31 of '16, and 12 they're in asking for rate relief the very next day. 13 there's not like a month break or a six-month break or a 14 year break. 15 asking for 826 million in rate relief. 16 it. So It's, boom, the very next day they're They don't need I wanted to make a point, as you consider 17 18 this, that rates and taxes are very, very similar. 19 They're essentially the same in that taxes are set by 20 governmental entities. 21 entity. 22 government. 23 imposed taxes and/or rates really don't have a choice in 24 paying them. 25 bill, you don't have the lights on. You all act as a governmental Taxes are used to fund a monopoly, the FPL is a monopoly. And the people who are I mean, if you don't pay your electric So the scrutiny FLORIDA PUBLIC SERVICE COMMISSION 000105 1 that's used when reviewing new taxes, legislative bodies 2 look at it skeptically and they look at it with some 3 aversion and reluctance. 4 same type of view that should be taken with respect to 5 FPL's request before you. We suggest that that's the The legislature in the past few years has made 6 7 a number of tax reductions for people. That's something 8 that is in order in this case. 9 have testimony before you that the rates aren't needed, 10 and I don't think there's really any dispute amongst any 11 of the intervenors. 12 the industrial customers, they don't need the rates. As I've pointed out, you From the military to the retail to 13 Now Mr. Pollock is going to be our witness. 14 He is going to point out that with respect to certain 15 industrial customers, FPL is seeking an 83 percent 16 increase. 17 point in time that industrial customers in the state are 18 declining. 19 customers are declining and FPL is proposing to hit them 20 with an 83 percent rate increase. That is a huge increase, and it's at the same So as the current facts are, industrial 21 CHAIRMAN BROWN: 22 MR. MOYLE: That's not warranted. Thirty seconds. FPL has taken away some credits, 23 some CILC credits that you all have used as a demand 24 device, a demand savings device. 25 justification for that. There's no The credits should be restored. FLORIDA PUBLIC SERVICE COMMISSION 1 And there's also some further rate design issues. 000106 2 I guess I would just close with this point. 3 Mr. Litchfield, when he was noting -- he said, "We've 4 done a great job on the price, the quality of service, 5 and the reliability." 6 sufficient to justify a rate increase. 7 8 9 Well, none of those are CHAIRMAN BROWN: Your time is done. Thank you. MR. MOYLE: We would ask no rate increase. Thank you, Mr. Moyle. 10 CHAIRMAN BROWN: 11 And thank you to all the parties for their 12 opening statements. 13 this process and a nice overview, so thank you very much 14 for those. 15 It's always such a good part of Moving along to the witnesses, and before we 16 call the first witness to the stand, we have about 20 17 minutes until the lunch hour. 18 of the APA's evidentiary standard applicable to this 19 proceeding. 20 states that, "Irrelevant, immaterial, or unduly 21 repetitious evidence shall be excluded," and I fully 22 intend to follow this standard. 23 of the parties here today and the attorneys to be 24 respectful of this process. 25 I want to remind everyone Section 120.569(2)(g) of Florida Statutes So, please, I ask all Also I want to remind everyone that when we FLORIDA PUBLIC SERVICE COMMISSION 000107 1 get to the intervenor witnesses, that friendly cross 2 will not be allowed as provided in the Prehearing Order. 3 We do have much ground to cover, as noted, and I want to 4 make sure that this is as efficient and fair of a 5 process as possible. 6 respectful to all. So please be mindful and Now as a house keeping matter and I don't 7 8 believe this was mentioned to you all during the 9 prehearing conference, but in order to facilitate a more 10 smooth hearing process, I'd like to ask that before you 11 begin conducting your cross-examination of a witness, 12 please provide our staff, who will be sitting and 13 accompanied here, with copies of all cross-examination 14 exhibits that you plan to use so they can be distributed 15 to us at one time. 16 will help facilitate more distribution. 17 that's possible, if you can do that, we would be 18 grateful for that. That will be extremely helpful and And, again, if Now I'll be swearing in all of the witnesses 19 20 at once. So for all of the witness who are here in the 21 audience today who are listed as witnesses in the 22 Prehearing Order, if you could please stand with me and 23 raise your right hand. 24 (Witness collectively sworn.) 25 Did I hear "I do"? Thank you so much. FLORIDA PUBLIC SERVICE COMMISSION Please 1 000108 be seated. All witnesses will be called in the order that 2 3 they appear in the Prehearing Order, with the exception 4 of those where everyone is in agreement that they will 5 be taken out of order, as we discussed earlier on. The order of cross-examination shall be as 6 7 follows for the direct: OPC, FIPUG, Hospitals, FRF, 8 FEA, Sierra Club, Wal-Mart, AARP, the Larsons, staff, 9 and then redirect. During intervenors' testimony, FPL 10 shall cross the witness immediately before staff. 11 As also stated in the prehearing order, 12 witnesses are permitted up to five minutes each on 13 direct and rebuttal to summarize their testimony. 14 please remember that the witnesses, you do not have to 15 use all of that allotted time. 16 So counsel for each witness shall be responsible for 17 entering their prefiled testimony and exhibits into the 18 record. But And I will be timing it. And I think that covers all of the witnesses. 19 Does anybody have any questions? 20 fellow Commissioners have any statements or comments 21 before we begin? 22 Staff, have I left anything out? 23 MS. BROWNLESS: 24 25 No, ma'am. Do any of my I think you've done a good job. CHAIRMAN BROWN: That's nice. Thank you. FLORIDA PUBLIC SERVICE COMMISSION All right. 1 2 000109 Mr. Butler, you may call your first witness. 3 MR. LITCHFIELD: Thank you, Madam Chairman. 4 FPL is pleased to call its first witness, its president, 5 Eric Silagy. 6 7 CHAIRMAN BROWN: Whereupon, 8 9 Good morning. ERIC SILAGY was called as a witness on behalf of Florida Power & 10 Light Company and, having first been duly sworn, 11 testified as follows: 12 13 EXAMINATION BY MR. LITCHFIELD: 14 15 Q Good morning. Good morning, Mr. Silagy. You were you just sworn moments ago, were you not? 16 A Yes, that's correct. 17 Q Would you please state your name and business 18 address for the record? 19 20 A Eric Silagy, 700 Universe Boulevard, Juno Beach, Florida 33408. 21 Q By whom are you employed and in what capacity? 22 A Florida Power & Light as the president and Q And you prepared and caused to be filed 23 24 25 CEO. 31 pages of prepared direct testimony in this FLORIDA PUBLIC SERVICE COMMISSION 000110 1 proceeding? 2 A That's correct. 3 Q Do you have any changes or revisions to your 4 prepared direct testimony? 5 A I do not. 6 Q Subject to the adjustments set forth in 7 Ms. Ousdahl's KO-19 and KO-20, if I were to ask you the 8 questions contained in your direct testimony, would your 9 answers today be the same? 10 11 A Yes, they would. Madam Chair, I would ask that MR. LITCHFIELD: 12 Mr. Silagy's prefiled direct testimony be inserted into 13 the record as though read. 14 MS. BROWNLESS: We will enter Mr. Silagy's 15 prefiled direct testimony into the record as though read 16 at this time. 17 18 19 20 21 22 23 24 25 FLORIDA PUBLIC SERVICE COMMISSION 000111 I. 1 INTRODUCTION AND SUMMARY 2 3 Q. Please state your name and business address. 4 A. My name is Eric Silagy. My business address is Florida Power & Light Company, 700 Universe Boulevard, Juno Beach, Florida 33408. 5 6 Q. By whom are you employed and what is your position? 7 A. I am employed by Florida Power & Light Company ("FPL" or the "Company") as President and CEO. 8 9 Q. Please describe your duties and responsibilities in that position. 10 A. I have overall responsibility for the management and operations of FPL. 11 Q. Please your educational background and professional experience. 12 13 describe A. I have a Bachelor of Arts in Economics from the University of Texas at 14 Austin and a Juris Doctorate from the Georgetown University Law Center. I 15 was appointed to my current position in 2011. My professional background is 16 described in more detail in Exhibit ES-1. 17 Q. Are you sponsoring or co-sponsoring any exhibits in this case? 18 A. Yes. I am sponsoring the following exhibits: 19 • ES-1 Eric Silagy Biography 20 • ES-2 Typical Residential 1,000 kWh Bill- 2006 through 2020 21 • ES-3 Value Provided to FPL Customers 22 23 3 000112 1 Q. What is the purpose of your testimony? 2 A. The purpose of my testimony is to provide an overview of FPL's filing and an 3 introduction of the witnesses who are submitting direct testimony on FPL's 4 behalf in support of the filing. 5 Q. Please summarize your testimony. 6 A. FPL is a major part of Florida's economic platform: we provide electric 7 service to more than 4.8 million customer accounts, or about half of our 8 state's homes and businesses; and, to my knowledge, FPL is the largest 9 private investor in the state. We recognize the important role FPL plays in 10 Florida and have worked hard to continue to improve the value we provide 11 customers. Indeed, today we provide electric service that is cleaner and more 12 reliable- and even more affordable- at a time when the average U.S. utility 13 bills have increased by about 29 percent over the last decade. In fact, today 14 our typical residential 1,000 kilowatt hour ("kWh") customer bill ("typical 15 residential bill") is about 14 percent lower than it was 10 years ago. 16 17 Our ability to deliver outstanding customer value is the result of consistent 18 and cumulative action over an extended period of time, reflecting a 19 philosophy and approach to our business that we sometimes refer to as the 20 "virtuous circle." The starting point for us on this "circle" is focusing on 21 delivering superior customer value. 22 satisfaction, which in turn helps to support a constructive regulatory 23 environment; and a constructive regulatory environment is necessary to help 4 Customer value promotes customer 000113 1 FPL maintain the strong financial position that has been, and remains, critical 2 to our ability to deliver a solid value proposition for our customers. It is 3 apparent that FPL's long-term strategy has worked extremely well. Of course, 4 many of the decisions we have made in support of this strategy have required 5 the approval and thorough oversight of the Florida Public Service 6 Commission (the "Commission"). 7 record of success and the policies and strategies on which that success has 8 been built. This filing seeks to continue the track 9 10 The core of our strategy over the last 15 years to deliver strong customer value 11 consists of four key elements: (1) a relentless focus on efficiency and 12 productivity; (2) smart investments that contribute to lower O&M, lower fuel 13 costs, lower emissions, better reliability, and otherwise improve customer 14 value; (3) sound financial policies including a strong balance sheet; and (4) a 15 willingness to innovate and embrace new ideas and technology. We feel very 16 good about the results that we have achieved through these efforts. Currently, 17 FPL's typical residential customer bill is about 30 percent lower than the latest 18 national average, helping keep Florida competitive economically. 19 Florida, FPL's typical residential bill is about 20 percent lower than the latest 20 statewide average of reporting utilities. At the same time, as FPL witnesses 21 describe, the Company delivers nationally recognized award-winning service, 22 outstanding reliability, and one of the cleanest generation emissions rates of 23 all large U.S. utilities. 5 Within 000114 1 Illustrative of our consistent, strong commitment to operating efficiently is the 2 fact that, over the last four years, FPL improved upon its already exceptional 3 non-fuel operating and maintenance ("O&M") performance. As demonstrated 4 in witness Reed's exhibit JJR-6, FPL has consistently been a best-in-class 5 performer and we continue to effectively manage non-fuel O&M. As FPL 6 witness Reed's analysis shows, in 2014 alone, FPL's annual non-fuel O&M 7 expense is $1.9 billion less than an "average" utility. Put another way, ifFPL 8 operated as an "average" company, our O&M would be more than double its 9 current level, adding about $17 to the monthly typical residential bill or 10 costing customers more than $200 per year. 11 12 To maintain and improve upon our combination of excellent service and low 13 bills for customers over the long term, we must continue to make smart, long- 14 term capital investments in our infrastructure. From the end of 2013 through 15 2017, on a total company basis, we will have invested $15.8 billion in our 16 infrastructure, or nearly $4 billion annually - far more than the Company 17 earns in any one year. In order to sustain such levels of investment cost- 18 effectively, obtaining an appropriate return on equity ("ROE") and recovering 19 prudently incurred costs is crucial. 20 21 In an effort to promote long term stability for customers, the Company and 22 Florida's economy, FPL's request addresses rates over a multi-year period. 23 Specifically, we are proposing a base rate adjustment in 2017, a smaller, 6 000115 1 subsequent-year adjustment in 2018, and an adjustment in mid-2019 that is 2 limited only to recovery of the cost of the FPL Okeechobee Clean Energy 3 Center. With the approval of these requests, there would be no general base 4 rate increases in 2019 and 2020. 5 approach is itself a significant benefit for customers in terms of providing rate 6 certainty, and avoiding repetitive and costly rate proceedings. While not without risks to FPL, this 7 8 In addition, this multi-year approach would allow the Company to continue 9 focusing on ways to improve its operations and performance, better meet 10 customer needs and expectations, and ultimately provide strong, smart 11 infrastructure that delivers reliable, clean, affordable electricity to the 12 Floridians and businesses we serve. As illustrated in Exhibit ES-2, today's 13 typical residential bill is significantly lower than both the state and national 14 averages and also is lower than it was ten years ago in 2006. In addition, we 15 currently project that through the remainder of this decade, even with these 16 requested base rate increases, our typical bill would continue to be lower in 17 2020 than it was in 2006, and would remain among the lowest in the state and 18 nation. 19 20 As a company, we know that when people choose to live in our service area 21 and businesses choose to expand or locate here, FPL's low bills, high 22 reliability, clean emissions and excellent customer service can play an 23 important role in their decision. The investments FPL has made with the 7 000116 1 approval of the Commission will continue to help us meet the increasing 2 needs and expectations of our customers. We are proud to serve our fellow 3 Floridians with outstanding value, supporting the strength and stability of 4 Florida's economy while preparing responsibly today to ensure we can meet 5 the energy needs of the future. If approved, this four year rate proposal would 6 enable us to continue on this successful path. 7 II. 8 HISTORY OF CONSTRUCTIVE SETTLEMENTS 9 10 Q. Please summarize FPL's recent base rate case history. 11 A. Over the last 17 years, FPL has entered into five multi-year settlement 12 agreements that in each instance were approved by the Commission. During 13 the relevant periods, those agreements provided customers with a degree of 14 rate stability and certainty while at the same time allowing the Company to 15 maintain a strong credit rating and balance sheet. This in tum has enabled 16 FPL to continue to meet customer needs through multiple major storms and 17 the worst financial crisis since the Great Depression - challenges that we hope 18 never recur, but which we must remain prepared to deal with in the future. 19 20 In approving our 2012 Rate Settlement, the Commission determined that the 21 agreement "provides FPL's customers with stability and predictability with 22 respect to their electricity rates, while allowing FPL to maintain the financial 23 strength to make investments necessary to provide customers with safe and 8 000117 1 reliable power." Order No. PSC-13-0023-S-EI, at 7-8. FPL's Commission- 2 approved settlement agreements, including our most recent four-year 3 agreement, have worked very well in meeting those objectives. At the same 4 time, they avoided additional costly and resource-intensive base rate 5 proceedings and allowed the Company's management team and employees to 6 focus on ways to continue to find efficiencies, develop and implement 7 innovative technologies and solutions, and improve the way in which services 8 are delivered. In my opinion, this constructive regulatory framework has been 9 a critical element of our success in becoming a top performer nationally in 10 delivering clean, reliable, low cost energy to our customers. Long-term rate 11 solutions have been a hallmark of Florida regulation over the last 17 years, 12 providing a significant degree of stability and certainty that otherwise would 13 not have been possible. 14 15 Of course, at the end of the term of any multi-year agreement the Company 16 and the Commission are able to review rate levels relative to the costs the 17 Company is incurring and expects to incur to provide service, including the 18 investments in infrastructure that the Company has made and is making. Such 19 a review also takes into account the typically rising costs of operations as well 20 as any efficiencies and cost reductions that the Company was able to realize 21 during the term of each settlement. 22 Q. Has the current settlement agreement worked well for customers? 23 A. Absolutely. As described by FPL witness Barrett and other FPL witnesses, 9 000118 1 the 2012 Rate Settlement has proven to be of significant value for our 2 customers. During the term of this settlement agreement, FPL has been able 3 to continue to improve its already high level of service and operational 4 performance. As I stated earlier, this period of stability has been one of the 5 key benefits of a multi-year rate solution, allowing management and all 6 employees to focus on improving service delivery for customers and realizing 7 additional efficiencies in the Company's operations. 8 9 During the term of the agreement, FPL completed its modernization of the 10 Cape Canaveral and Riviera Beach plants on time and on or under budget. 11 The modernization of the Port Everglades plant also is nearing completion and 12 is expected to be operational ahead of schedule and under budget. FPL also 13 has continued to improve its performance in several key categories both 14 nationally and statewide. Specifically, FPL has: (1) lowered O&M costs; (2) 15 worked to reduce future costs, as demonstrated by the buy-out of the Cedar 16 Bay Power Purchase Agreement; (3) lowered emissions even further; (4) 17 continued to make improvements in system fuel efficiency; and (5) improved 18 reliability. 19 among the lowest in the state and nation. These achievements are discussed in 20 detail by FPL witnesses Barrett, Kennedy, Santos, Miranda, Reed, and others. 21 In short, we continued to look for ways to provide the highest level of overall 22 service to Florida customers at a reasonable cost, delivering significant 23 improvements in customer value. This was accomplished while keeping typical customer bills 10 000119 III. 1 FPL'S OPERATING PHILOSOPHY AND VISION 2 3 Q. Please describe FPL's operating philosophy. 4 A. Central to our operating philosophy is a strong and steady focus on improving 5 customer value both short and long term. We approach this as an ongoing 6 process involving smart investments in our infrastructure and a sustained 7 commitment to efficiency and productivity and, in general, improving all 8 aspects of our service and reliability. 9 customer value did not and does not happen overnight or by accident. Rather, 10 it is, and must be, the result of consistent and cumulative action over an 11 extended period of time. Our ability to deliver outstanding 12 13 The success we have had in delivering outstanding customer value reflects a 14 longstanding philosophy and committed approach to the business that we 15 sometimes refer to as the "virtuous circle" and is discussed by FPL witness 16 Dewhurst. 17 focusing on delivering superior customer value. Fundamentally, and perhaps 18 obviously, we believe that exceptional customer value results in strong 19 customer satisfaction. 20 satisfaction in tum helps to support a constructive regulatory environment. A 21 constructive regulatory environment, in tum, is essential to our ability to 22 deliver customer value, because to deliver that value FPL must maintain a 23 strong credit rating, have ready access to sufficient debt and equity capital, Not surprisingly, the starting point for us on this "circle" is The combination of customer value and customer 11 000120 1 and rely on stable, constructive regulation to make the types of smart, 2 innovative, capital-intensive investments necessary to produce that customer 3 value. 4 customers over many years. The Company's request in this proceeding is a 5 proposal to continue this proven and very successful approach. This virtuous circle model has worked exceptionally well for 6 7 Under the framework I just described, we strive to do the right thing even 8 before we are ordered or asked to do so - and at times in the face of intervenor 9 opposition that is focused only on the short-term. When the Great Recession 10 was disrupting other Florida businesses, we maintained our long term 11 perspective, continuing to make smart investments in our infrastructure and 12 building a system that would provide long-term benefits to customers in terms 13 of both reliability and low bills. A key example is our ongoing investment in 14 highly efficient generating plants that have saved our customers billions of 15 dollars in fuel costs. In addition, these investments have positioned us to be in 16 compliance today with the 2030 carbon emission rate target that the U.S. 17 Environmental Protection Agency's Clean Power Plan ("CPP") has proposed 18 for Florida. Another example is the modernization of our grid, building one 19 of the strongest and smartest grids in America today. At a time when many 20 areas of our country are struggling to deal with daunting infrastructure 21 problems, we can be proud of the smart, modem infrastructure we have built 22 in Florida and the value that it brings to customers every day. 12 000121 1 Q. strategy. 2 3 Please describe the benefits of FPL's forward-looking investment A. Had we not started investing in clean generation years ago, we would not be 4 positioned as we are today - providing significant fuel savings to customers 5 and standing much better prepared than most companies to meet the CPP 6 standards. Had we not started years ago to build a smarter and stronger grid, 7 we would not be in the position today of providing outstanding reliability to 8 our customers. Had we not invested in FPL's and Florida's future, we would 9 probably be just an average performing utility today - meeting our basic 10 regulatory requirements, but not providing the billions in annual savings that 11 we currently provide. FPL's track record demonstrates that there are real, 12 tangible customer benefits, including comparatively low electric bills and high 13 reliability, from FPL's approach. 14 15 FPL has provided a number of substantial benefits for our customers by not 16 settling for being an "average utility." For example, if FPL were an average 17 performing utility: 18 • Our customers' reliability would be 50 percent higher (Florida average of92 minutes versus FPL average of61 minutes); 19 20 • Annual fuel costs would be more than $400 million higher; 21 • Annual non-fuel O&M expense would be nearly $2 billion higher; 22 • The annual typical residential bill would be nearly $500 higher overall; 23 and 13 000122 • 1 Emissions would be higher, adding the equivalent of more than six 2 million cars to our roads for an entire year and our risk of incurring 3 billions of future 4 substantially increased. environmental compliance costs would be 5 6 We believe that the ability to take a long term perspective is what has worked 7 for our customers and for Florida, and we must continue on that path. The 8 ability to deliver value to customers is a result of cumulative and consistent 9 actions taken over an extended period of time. 10 IV. 11 THE VALUE FPL CURRENTLY PROVIDES 12 13 Q. Please highlight FPL's performance and service to its customers. 14 A. FPL is an industry leader in most of the core aspects of its operations and 15 service. Exhibit ES-3 provides a summary of the value that our customers 16 enjoy as a result of our strong overall performance. In addition, key elements 17 of the Company's performance and service are described by FPL witnesses in 18 more detail as follows: 19 • FPL witness Cohen explains that FPL' s typical residential bill 20 currently is among the lowest in the state and has been the lowest, on 21 average, for the past seven years; 22 23 • FPL witnesses Morley and Cohen explain that, over the last decade, inflation was nearly 20 percent, and the costs of many other goods and 14 000123 increased even more. For example, food and 1 services have 2 homeowners/renters msurance have both increased by 28 percent 3 while the cost of medical care has increased by 3 8 percent. Over that 4 same period, the national average typical residential electric bill has 5 increased by about 29 percent. However, over that same period, FPL's 6 typical residential bill has gone down 14 percent, and typical 7 commercial and industrial bills have gone down from 16 percent to 23 8 percent; 9 • FPL witness Kennedy explains that the transformation of FPL's 10 generating fossil fleet since 1990 has resulted in industry-leading "top 11 decile" or "best-in-class" performance across key indicators (e.g., heat 12 rate, forced outage rate) and avoided C0 2 emissions; in fact, our 13 efficiency improvements since 2001 have resulted in approximately $8 14 billion in customer fuel savings strictly from lower fuel consumption 15 by more efficient generating units; 16 • FPL witness Santos explains that FPL's Customer Service continues to This 17 be recognized nationally, as evidenced by numerous awards. 18 superior customer service and high level of customer satisfaction is 19 achieved through continuous process improvement and state-of-the-art 20 technology deployment; 21 • FPL witness Miranda presents FPL's outstanding Power Delivery 22 reliability - FPL's System Average Interruption Duration Index 23 ("SAID!") is best among the Florida investor-owned utilities over the 15 000124 1 last decade. Additionally, FPL's 2014 SAIDI performance ranked 44 2 percent better than the national average, based on the most recent data 3 reflected in PA Consulting's annual reliability benchmarking study. As 4 FPL witness Miranda explains, FPL has one of the strongest and most 5 advanced grids in the nation and continues to incorporate enhanced 6 smart grid technology to improve reliability, and proactively anticipate 7 and respond to system disturbances. Additionally, FPL is an industry 8 leader in logistics, storm preparedness and storm response; • 9 FPL witness Goldstein addresses the availability, efficiency and safe 10 operations of FPL's nuclear units, which for decades have delivered 11 billions of low-cost kilowatt hours to customers with zero emissions; 12 and • 13 FPL witness Reed discusses the Company's outstanding non-fuel O&M performance and operational efficiency. 14 15 Q. What is the basis for FPL's strong performance? 16 A. I discussed previously the constructive regulatory framework and stability of 17 multi-year rate solutions that have afforded FPL the opportunity to focus on 18 system and operational efficiencies and improvements. 19 framework, there is no doubt that two keys to our success have been and 20 continue to be our ability to attract and retain excellent employees and our 21 culture of innovation and continuous improvement. A few recent examples 22 include: 16 But within such a 000125 • in the 1990s when we began the modernization of our generation fleet; 2 3 FPL was an early mover toward a cleaner, lower cost generating fleet • FPL has developed (both through its experience as well as extensive 4 planning and review efforts) one of the top storm preparation and 5 response organizations in the industry; 6 • FPL has redesigned its compensation and benefits programs to keep 7 costs low while at the same time providing more value for attracting, 8 retaining, and engaging employees; 9 • of cost-effective solar generation, which benefits all customers; 10 11 • FPL has deployed an award-winning Advanced Metering Infrastructure and enhanced smart grid system; and 12 13 FPL has been a leader in Florida in the development and construction • FPL has implemented an initiative, known internally as Project 14 Momentum, that is specifically focused on generating and evaluating 15 productivity and efficiency improvement ideas. 16 17 FPL is a top performer in major categories of operational performance and has 18 one of the cleanest, most efficient generation fleets in the country, and we 19 have achieved these results cost-efficiently, with bills that are well below the 20 national and state averages. In fact, most customers are paying less today than 21 they did 10 years ago. At the end ofthe day, we recognize the essential nature 22 of what we do. We take our responsibility seriously, and we are committed to 23 doing it right. We are honored to be recognized nationally as a leader in our 17 000126 1 industry for the significant value we provide our customers, and we are 2 always looking for ways to improve. 3 Q. the industry? 4 5 How has the Company's overall strong performance been recognized by A. FPL is an internationally-recognized company, having received a number of 6 prestigious and significant awards, as described by our operational witnesses. 7 In addition, there are three NextEra Energy awards that I believe underscore 8 FPL's high level of overall performance and contribution to our parent 9 company's success. NextEra Energy has been ranked No. 1 in the Electric 10 and Gas Utilities sector on Fortune's list of "World's Most Admired 11 Companies" nine out of the last 10 years. NextEra Energy has also been 12 named a World's Most Ethical Company® seven times by the Ethisphere 13 Institute, an independent center of research promoting best practices in 14 corporate ethics and governance. In addition, N extEra Energy in 2015 was 15 ranked by EI Energy Intelligence as the top green utility in the United States 16 and No. 4 in the world based on clean emissions and renewable energy 17 capacity. 18 V. 19 SUMMARY OF BASE RATE REQUEST 20 21 Q. Why is FPL seeking a base rate increase? 22 A. FPL currently serves about 4.8 million customer accounts representing more 23 than 10 million people in 35 Florida counties, with approximately 68,000 18 000127 1 miles of distribution lines and 6,900 miles of high voltage transmission lines, 2 and more than 26,000 MW of installed capacity. We have a responsibility to 3 maintain our existing infrastructure, and to plan and invest to meet customer 4 needs today and in the future, and we strive to do so affordably and reliably. 5 We also are aware of the significant responsibility and economic impact we 6 have as the largest electric utility in Florida, the state with the fourth-largest 7 gross domestic product in the U.S., and 18th largest economy in the world. 8 9 In order to fulfill that responsibility, we must first maintain the ability to 10 continue delivering value for customers so that Florida remains an attractive 11 place to live and a competitive environment for businesses to succeed. 12 Consistent with the prior rate adjustments that were necessary and have been 13 approved by the Commission, our current request will ensure that continued 14 viability. Again, as discussed by FPL witnesses Santos, Miranda and Cohen, 15 we expect to continue to improve service at rates that are projected to remain 16 among the lowest in the state and nation, even with these requested 17 adjustments. As discussed by FPL witness Morley, this can be contrasted 18 with the rising costs of most other consumer goods and services, such as food, 19 medical care, and homeowners/ renters insurance. 20 Q. Please describe FPL's proposed four-year rate plan proposal. 21 A. Prior multi-year rate settlements have allowed FPL to focus on improving its 22 performance and service delivery for customers and have provided the 23 Company with the financial capacity to make the necessary investments to 19 000128 1 improve the infrastructure through which those services are delivered. FPL's 2 base rate proposal similarly lays out a multi-year approach. FPL's request 3 will allow it to continue to improve on the value FPL provides its customers 4 and enhance bill certainty and stability through 2020. 5 6 Specifically, we are proposing a comprehensive base rate adjustment for 2017, 7 a smaller, subsequent-year adjustment in 2018, and an adjustment in mid-2019 8 that is limited only to recovery of the cost of the FPL Okeechobee Clean 9 Energy Center once the unit begins generating power for our customers. 10 Approval of these requests would allow us to commit to no general base rate 11 increase until 2021, at the earliest. 12 13 As addressed by FPL witness Ousdahl, absent any rate relief in 2017, the 14 Company's ROE is projected to fall to 7.88 percent, which is well below the 15 bottom end of the current authorized ROE range. Absent any rate relief in 16 2017 and 2018, the Company's ROE is projected to be only 6.95 percent. 17 Rather than conduct separate base rate cases for both 2017 and 2018, and 18 create uncertainty around subsequent potential needs for 2019 and 2020, 19 approval of our proposed plan (general increases in 2017 and 2018, and a 20 limited increase in 20 19) would enable the Company to continue investing in 21 operational and service-related improvements without additional base rate 22 proceedings for rates effective through 2020. We believe this is the most 23 efficient and effective approach to long-term rate and revenue certainty and, 20 000129 1 as we have demonstrated over the past four years, is in the best interest of our 2 customers. 3 4 Importantly, I also would note that the Commission retains full surveillance 5 authority over the Company for all four years of the proposed plan. If at any 6 time the Company's earnings were to exceed the approved range, the 7 Commission could conduct an earnings review and reset rates, if necessary. 8 Q. Please describe the Company's request for a base rate increase in 2017. 9 A. The 2012 Rate Settlement provided for limited base rate increases and 10 deferred a general base rate proceeding for four years, but it did not avoid the 11 underlying need for a general base rate increase in 2017. As a result, and as 12 described by FPL witness Barrett and other witnesses, FPL's base rate request 13 for 2017 is driven in large part by the significant investment during 2014- 14 2017, for which there is no provision for recovery in the current settlement 15 agreement. This investment is necessary in order to address customer growth, 16 improve reliability and storm resiliency, expand clean energy generation 17 capabilities, meet regulatory compliance requirements and provide long-term 18 customer savings. 19 20 FPL does not operate as a short-term thinker and, indeed throughout the term 21 of the current settlement, we have continued to maintain a long-term, 22 customer-centric approach to our planning. The investments we have made, 23 financed primarily through capital markets and supported by base rates, are 21 000130 1 designed to maintain the strong value that the Company delivers to customers 2 - high reliability, clean energy and low bills. 3 4 FPL witnesses Barrett, Goldstein, Kennedy and Miranda will address these 5 investments in their testimonies. But before they do, I would like to provide a 6 brief overview: 7 • Reliability: While our service reliability is excellent - better than 8 99.98 percent reliable - we must continue to invest in order to make 9 the grid stronger, smarter, more responsive and more resilient to 10 outage conditions. FPL' s initiatives and efforts to strengthen, 11 modernize and improve the reliability of its grid are consistent and 12 aligned with the Department of Energy's "Grid Modernization 13 Initiative" issued March 2015, and its recently issued (November 14 20 15) "Grid Modernization Multi-Year Program Plan." 15 • Capital requirements for customer growth: For the period 2014 16 through 2017, we project nearly 220,000 new service accounts, and 17 over 450,000 new service accounts by the end of 2020. In the face of 18 such significant growth, FPL must build facilities in advance to meet 19 the needs of these additional customers. To put this in perspective, 20 only three of Florida's 55 electric utilities have more than 450,000 21 customers - in effect, by the end of the decade, we will be adding what 22 would equate to the fourth largest electric utility in Florida. 22 000131 1 • Generation advancements: FPL's high-efficiency fleet of power plants 2 has one of the cleanest emission profiles among comparable utilities 3 nationwide, and we continue to invest in cleaner, more fuel-efficient 4 generation, including the modernization of aging peaking units and the 5 addition of three new large-scale solar energy centers. 6 7 Finally, the 2012 Rate Settlement authorized an ROE midpoint of 10.5 8 percent. As FPL witnesses Dewhurst and Revert discuss, a solid financial 9 platform is essential to FPL's ability to continue to invest capital strategically 10 and beneficially for customers in a variety of market conditions, and to 11 respond quickly to emergency situations. Indeed, FPL's need for financial 12 strength is particularly important because of the unique and significant 13 exposure that our predominantl y coastal service area faces and the lack of a 14 fully-funded storm reserve. 15 16 Fundamentally, we believe that sound regulatory policy suggests that 17 companies with a proven record of delivering better value for their customers 18 should be encouraged to continue their best-in-class performance. Taken in 19 combination, FPL witnesses Dewhurst and Revert recommend an appropriate 20 allowed retail regulatory ROE midpoint for FPL of 11.5 percent, which 21 includes a 50 basis point ROE adder that would recognize FPL's strong track 22 record of superior performance and provide an incentive for continued future 23 strong performance. This Commission has utilized ROE adders in the past to 23 000132 1 encourage superior performance. As FPL witness Dewhurst addresses, the 2 ROE adder is an appropriate mechanism by which the Commission can 3 encourage utilities to strive to be exceptional - not just FPL, but all utilities. 4 In most rate cases, 5 One final note on what is not in the 2017 request. 6 increases in non-fuel O&M costs are a significant driver of the base rate 7 request. However, a key factor in the ability of our Company to avoid the 8 need for a base rate increase since 2013 has been our aggressive focus on 9 controlling these O&M costs. As FPL witness Barrett describes, despite 10 general inflation-related increases and customer growth that are projected to 11 add nearly $145 million to our non-fuel operating costs, we estimate that our 12 non-fuel base O&M expense will actually be lower in 2017 than it was in 13 2013. This is a remarkable achievement by our employees and, as a result, 14 FPL has moved from an already impressive top-decile cost position to being 15 the best-in-class utility in non-fuel O&M cost management. 16 extraordinary efficiency provides real and substantial savings for our 17 customers every single day. This 18 Q. Please describe the Company's request for a base rate increase in 2018. 19 A. As noted above and as described by FPL witness Ousdahl, even with the full 20 relief in 2017, the Company's ROE will fall below the approved range in 21 2018. Rather than file a separate case in 2017 for new rates in 2018, we are 22 requesting a Subsequent Year Adjustment for 2018. 23 testimony of FPL witness Barrett, the primary drivers of the increase in 24 As addressed in the 000133 1 revenue requirements in 2018 include continued investments in infrastructure 2 to support system growth and to provide long-term economic and/or reliability 3 benefits to customers. 4 Q. increase in 2019. 5 6 Please describe the Company's request for a limited scope base rate A. As addressed by FPL witness Kennedy, the Company's investment in the 7 construction of a highly fuel-efficient, state-of-the-art combined cycle ("CC") 8 natural gas unit will be completed in mid-2019. FPL's Okeechobee Clean 9 Energy Center is projected to be the most fuel-efficient CC unit on FPL's 10 generation system, further enhancing customer savings produced by our 11 already highly efficient system. We also expect it to be the most fuel-efficient 12 and among the cleanest gas-fired units not only in the state of Florida, but in 13 the world. Beyond the fuel savings and system reliability improvements, the 14 Okeechobee Clean Energy Center is estimated to generate significant 15 economic benefits, including millions of dollars in tax revenues for local 16 governments and school districts and hundreds of good-paying temporary and 17 permanent jobs. 18 19 Given the $1.2 billion capital cost associated with the addition of a new power 20 plant based on the Commission need determination in Order No. PSC-16- 21 0032-FOF-EI, FPL witnesses Barrett and Ousdahl explain our request to 22 include recovery of this investment in base rates in 2019 when the unit enters 23 commercial operation. This limited scope adjustment will not include any 25 000134 other capital investments or O&M costs; rather, it will address only the cost of 2 the unit once it begins providing benefits to customers, including a 3 corresponding reduction in fuel costs. 4 Please describe the specific rate adjustments that the Company is Q. requesting. 5 6 As FPL witnesses Barrett and Ousdahl describe, and as is presented in the A. 7 minimum filing requirements ("MFRs"), the Company is requesting approval 8 of the four-year rate plan summarized below: 9 • $866 million increase effective in January 2017; 10 • $262 million subsequent year adjustment effective in January 20 18; 11 • $209 million limited scope adjustment for the Okeechobee Clean Energy Center in mid-2019 once the unit goes into service; and 12 • 13 No increase in 2020. 14 This structured approach will ensure continuation of the industry-leading 15 value proposition that we deliver to customers - high reliability, clean energy 16 and low bills. 17 18 VI. ACTIONS TAKEN TO MITIGATE THE REQUESTED INCREASE 19 20 Q. increase? 21 22 23 What actions has FPL taken to control costs and mitigate the requested A. As discussed in more detail below and also by several ofFPL's witnesses, the Company has worked hard and has been innovative with respect to managing 26 000135 1 and controlling costs. This is one reason that the typical residential bill for an 2 FPL customer has been the lowest bill on average in the state for the past 3 seven years among reporting electric utilities, approximately 20 percent lower 4 than the Florida average and approximately 30 percent lower than the national 5 average, as discussed by FPL witness Cohen. 6 7 The 2012 Rate Settlement benefitted customers by eliminating the need for 8 further general base rate increases for the years 2014-2016, providing stability 9 and certainty around the level of customer bills. Throughout the term of the 10 agreement, FPL has continued its diligence in working to hold costs down 11 while continuing to deliver outstanding reliability and superior performance in 12 all areas of operations. 13 As previously stated and as 14 FPL prides itself on operating efficiently. 15 described by FPL witness Barrett, one key factor in the ability of our 16 Company to avoid the need for a base rate increase since 2013 has been 17 Project Momentum - an aggressive, internally generated approach to control 18 non-fuel O&M costs. FPL witness Reed addresses our overall O&M costs. 19 His benchmarking shows that FPL has out-performed similarly-sized 20 companies across an array of financial and operational metrics. Today our 21 non-fuel O&M performance is best in class. As explained by FPL witness 22 Barrett, despite inflation-related increases as well as other business cost 27 000136 1 increases, FPL's actual non-fuel O&M expense is projected to be millions of 2 dollars lower in 2017 than it was in 2013. 3 4 As I previously stated, and as explained by FPL witness Reed, for 2014 alone 5 (the last year for which data is available), if FPL had been just an average 6 performer among benchmarked electric companies instead of having 7 exceptional performance, we would be spending $1.9 billion more than we 8 currently do every year to deliver the same product to our customers. To put 9 it another way, if we were an average performing electric provider with an 10 additional O&M expense of $1.9 billion annually, our typical residential 11 monthly bill would be higher by about $17- an increase of about 18 percent 12 over the current level. This relentless and aggressive focus on operational 13 efficiency is an extraordinary achievement that has and will continue to result 14 in over $200 a year in savings for our customers. 15 16 FPL's fossil fleet generation performance, as addressed by FPL witness 17 Kennedy, also has resulted in significant savings to customers, reducing the 18 potential impact of a base rate increase. The transformation of our fossil fleet 19 over time has resulted in substantial improvements to operating performance, 20 resulting in industry leading reductions to system heat rate, carbon dioxide 21 and other air emissions, forced outage rate and total non-fuel O&M costs. As 22 discussed by FPL witness Kennedy, the improvements in fuel consumption 23 and O&M costs at our fossil plants resulted in $1 billion of savings for 28 000137 These savmgs are directly attributable to our 1 customers m 2015 alone. 2 continuous investments in highly efficient generation, investments that some 3 opposed but which today clearly are benefiting all customers and Florida's 4 economy. 5 addition to the savings from lower natural gas prices in recent years. It is important to note that these fuel-efficiency savings are in 6 7 Further, our fleet's carbon emission rate places us in an excellent position to 8 exceed the U.S. Environmental Protection Agency's CPP goal ultimately 9 implemented in Florida, assuming the CPP legal challenges are unsuccessful. 10 Currently, FPL is the only utility in the state, and likely one of the few in the 11 nation, to be in such an advanced position today. The end result is cleaner air 12 for all Floridians today and a major cost advantage for FPL customers for 13 years to come by preventing billions of dollars in compliance costs that might 14 otherwise be necessary. 15 16 FPL's long-term steady approach, our culture of innovation, and our steadfast 17 commitment to excellence have created an ongoing progressive effort for 18 improvement within the Company. This culture, in tum, has benefitted our 19 customers with typical bills that are less now than they were 10 years ago and 20 higher reliability, lower emissions, and lower fuel costs - an uncommon 21 combination of value. 22 23 29 000138 VII. 1 INTRODUCTION OF WITNESSES 2 3 Q. Who will be testifying on FPL's behalf in this proceeding? 4 A. In addition to me, the following Company witnesses will testify as part of 5 6 FPL's direct case: • performance adder, storm recovery mechanism; 7 8 • • Kim Ousdahl - Calculation of the revenue requirements and requested revenue increases, accounting issues and Company adjustments; 11 12 Robert E. Barrett, Jr.- Support for requested revenue requirements, FPL' s financial forecast; 9 10 Moray P. Dewhurst- Capital structure and financial policies, ROE • Robert B. Revert, CF A, Sussex Economic Advisors, LLC - Cost of equity and capital structure; 13 14 • Manuel B. Miranda - Power Delivery costs and performance; 15 • Roxane R. Kennedy- Power Generation costs and performance; 16 • Marlene M. Santos - Customer Service costs and performance; 17 • Mitchell Goldstein -Nuclear costs and performance; 18 • John J. Reed, Concentric Energy Advisers- FPL's operational and financial performance relative to industry benchmarks; 19 20 • Rosemary Morley- Sales and load forecast; 21 • Kathleen Slattery- Payroll and benefit expense; 22 • Tiffany C. Cohen- Rate design; 23 • Renae B. Deaton - Cost of service; 30 000139 • 1 Keith Ferguson- 2016 Depreciation and Dismantlement Studies, Decommissioning Study; and 2 • 3 Ned W. Allis, CDP, Gannett Fleming Valuation and Rate Consultants, LLC- 2016 Depreciation Study. 4 5 6 Some of these individuals, as well as others, also may provide rebuttal 7 testimony on behalf of FPL. 8 Q. that of the other FPL witnesses? 9 10 What conclusion should the Commission draw from your testimony and A. We at FPL are proud of the achievements that allow us to deliver exceptional 11 customer value - low bills combined with high reliability, excellent customer 12 service and low emissions rates. 13 continuous improvement and innovation, we intend to continue to improve 14 even further. That objective underscores FPL's request in this proceeding. 15 Our request will enable us to continue to invest in our system and deliver 16 exceptional customer value. 17 customers' and the state's interests in low cost, reliable, clean power will be 18 best served. And consistent with our culture of With a constructive regulatory outcome, our 19 Q. Does this conclude your direct testimony? 20 A. Yes. 31 1 2 000140 BY MR. LITCHFIELD: Q And, Mr. Silagy, you also have two exhibits 3 that were identified as ES-1 -- excuse me, 4 three exhibits identified as ES-1 through ES-3 attached 5 to your direct testimony; correct? 6 A That's correct. 7 Q These were prepared also under your direction 8 9 or supervision? A 10 Yes, they were. MR. LITCHFIELD: Madam Chair, I would note 11 that these have been pre-identified in staff's 12 Comprehensive Exhibit List as Exhibits 44, 45, and 46 13 respectively. 14 15 16 17 18 19 CHAIRMAN BROWN: Thank you. BY MR. LITCHFIELD: Q Mr. Silagy, would you at this time provide a summary of your direct testimony to the Commission? A I would. Madam Chairman and Commissioners, on behalf of 20 all of FPL employees, thank you for the opportunity to 21 be here today. 22 hear from a lot of FPL witnesses. 23 cover both our performance over the past four years and 24 also, importantly, about our future plans. 25 going to hear a lot of big numbers. Over the next two weeks you're going to They're going to You're also That's not FLORIDA PUBLIC SERVICE COMMISSION 1 surprising because we're a big utility serving nearly 2 10 million people, or half of the population of the 3 third largest state in America. 4 that in our case it's going to be associated with big 5 numbers. 6 customer bill. 7 my little spiel on the state speech. 8 performance over the last four years has been very 9 strong. 000141 So it's not uncommon However, what's not big is our average Don't worry. I'm not going to go into But our 10 We've successfully completed a number of very 11 large and important capital projects such as Canaveral, 12 Riviera Beach, and Port Everglades. 13 on time, if not early, and on, if not under, budget. 14 We've improved reliability on a system that was already 15 the most reliable in Florida and now among the United 16 States as a whole. 17 profile that was already the cleanest in Florida. 18 is the cleanest in the southeast U.S. and among the 19 cleanest in the United States. 20 awards, national awards for excellent customer service. 21 And all at a time when many other utilities around the 22 country were actually raising their bills, we, in the 23 past ten years, have actually lowered our bills. 24 fact, our bills are lower today than they were a decade 25 ago, and our bills are 30 percent lower than the All were completed We've improved on an emissions Now We've won a number of FLORIDA PUBLIC SERVICE COMMISSION In 1 000142 national average. We've also continued to look for ways 2 3 throughout the company to tighten our own belts to save 4 on costs. 5 and we've been able to reduce those significantly. 6 now benchmark, as you'll hear from Witness Reed, best in 7 class in the United States. 8 decile performer. 9 difference in us performing like an average utility is a 10 cost savings of $1.9 billion a year in O&M that we don't 11 spend each and every a year. 12 customers every single month, month in and month out. 13 In fact, it translates to a savings of over $17 a month 14 on the average customer bill on just the amounted of O&M 15 that we don't spend compared to being an average 16 utility. We've had a lot of focus on our O&M expenses, We Four years ago we were top Now we're best in class. The That's real savings for 17 As Witness Barrett will explain, our proposal 18 is largely driven by the investments in infrastructure. 19 These investments will do a variety of things, including 20 they'll strengthen our grid, they'll continue to improve 21 our reliability and, importantly, our storm resiliency. 22 They'll continue to allow us to ensure compliance with a 23 growing body of NERC, FERC, and other federal regulatory 24 requirements. 25 generation fleet, including the cost of -- or for the They'll allow us to further upgrade our FLORIDA PUBLIC SERVICE COMMISSION 000143 1 use of cost-effective solar power, and ultimately these 2 are going to end up providing savings for customers. We're also proposing an adjustment to our 3 4 allowed equity midpoint of 11 percent and proposing a 5 50-basis-point equity adder to recognize our excellent 6 performance, the value we provide customers, but most 7 importantly, to also incentivize that continued 8 performance and, frankly, to send a message to the 9 entire state that performance does matter. Witness Hevert and Dewhurst will discuss these 10 11 detailed -- these points in detail. What is clear that 12 our financial strength and our ability to attract 13 capital is critical and ultimately translates into 14 customer savings. Commissioners, we're not perfect and there's 15 16 always room for improvement. But I think as you can 17 tell, I'm pretty proud of the performance that our 18 company and our employees have delivered to customers 19 over the past four years, and this case is really about 20 our ability to be able to continue to do that going 21 forward. 22 years ago has provided us stability and predictability 23 and the necessary financial resources and the strength 24 to deliver what is arguably the best value proposition 25 in the United States. Your approval of a multiyear settlement four This case is about us being able FLORIDA PUBLIC SERVICE COMMISSION 1 to stay on that path, to continue to provide that 2 excellent value to customers, and I appreciate the 3 opportunity to present it today. 4 5 CHAIRMAN BROWN: Thank you. Thank you very much, Mr. Silagy. 6 7 000144 MR. LITCHFIELD: Thank you, Madam Chairman. Mr. Silagy is available for cross-examination. Thank you. 8 CHAIRMAN BROWN: 9 with the Office of Public Counsel. 10 MR. WRIGHT: We will begin Madam Chairman, may I ask, would 11 you please go down the order of party cross-examination 12 one more time? 13 CHAIRMAN BROWN: 14 MR. WRIGHT: 15 16 Absolutely. I wasn't writing quite fast enough. CHAIRMAN BROWN: Absolutely. And this is 17 going to be for all of the direct witnesses, so please 18 pay attention. 19 Hospitals, FRF, FEA, Sierra, Wal-Mart, AARP, Larsons, 20 staff, and then FPL redirect. 21 staff didn't provide that to you a little bit earlier 22 for you, but -- 23 Office of Public Counsel, FIPUG, MR. WRIGHT: And my apologies that Madam Chairman, they may well 24 have in an email. There have been a lot of emails. 25 Just for planning purposes and getting my cross exhibits FLORIDA PUBLIC SERVICE COMMISSION 1 to the staff, may I ask, do you plan to take lunch at 2 noon, or do you have a plan on that? 3 CHAIRMAN BROWN: 000145 We'll see where there's a 4 natural stopping point, but somewhere between 12:00 and 5 12:30. Thank you. 6 MR. WRIGHT: 7 CHAIRMAN BROWN: 8 Now it's Office of Public Counsel's turn. 9 MS. CHRISTENSEN: 10 11 You're welcome. Thank you. EXAMINATION BY MS. CHRISTENSEN: 12 Q And good morning, Mr. Silagy. 13 A Good morning. 14 Q I just have a few questions for you. I wanted 15 to clarify, I think you went through this with your 16 counsel, you do not have changes to your direct 17 testimony that you filed March 15th, 2016; correct? 18 A Correct. 19 Q Okay. 20 And you did not file an errata to your direct testimony; is that correct? 21 A That's correct. 22 Q Okay. 23 testimony. 24 A I'm there. 25 Q Okay. Can I refer you to page 7 of your Let me know when you're there. Great. On page 7 you say, "With the FLORIDA PUBLIC SERVICE COMMISSION 000146 1 approvals of these requests, there will be no general 2 base rate increase for 2019 and 2020"; is that correct? 3 A That's correct. 4 Q Okay. And are you referring to FPL's 2017, 5 '18, and '19 request in that statement? 6 correct summary of your testimony? 7 A Is that a I'm referring to the updated filings that were 8 made. I think Mr. Litchfield asked me that during my 9 questioning about KO -- I'll have to look at the 10 number -- but our amended filing, 826 million, 270 11 million, and the 209 million, if that's what you're 12 asking me, Counselor. Okay. And I just want to make sure that I'm 13 Q 14 clear. 15 revenue requirement for 2017, which is the 826 million 16 you talked about; 2018, the 207 million that you 17 mentioned; and the Okeechobee step increase, which I 18 think is around 206 million -- I may be wrong on that. If the Commission approves less than the full 19 A 209. 20 Q 209 million. Would your statement that there 21 will be no general base rate increase in 2019 and '20 22 still be correct? 23 A So what is the question? 24 Q The question essentially boils down to if the 25 Commission were to grant something less than the full FLORIDA PUBLIC SERVICE COMMISSION 000147 1 revenue request that was made by FPL in the proceeding, 2 would the statement that there will be no general base 3 rate increase in 2019 and '20 still hold true? 4 A Commissioners, I don't know the answer to that 5 question. 6 and a request that would allow us to commit to staying 7 out for four years if the request is granted. 8 your judgment something less is granted to FPL, then 9 we'd look very hard at what our opportunities would be 10 11 12 13 14 15 We've tried very hard to come up with a plan If in to stay out or whether or not we'd need to come back in. Q Okay. And just to be clear then, it's not a definitive, yes, we will stay out through 2020? A Our commitment is absolutely definitive, that based on our filing, we will stay out through 2020. Q All right. Now I'm confused because to the 16 last question, if you get something less than the full 17 revenue requirement that you requested, you testified 18 that you didn't know whether or not you would be able to 19 stay out, and then you said, "Yes, we will commit to 20 stay out even if we get something less than the 21 revenue -- full revenue requirement." 22 make sure I understand. 23 A I just want to No, Counselor, that's not what I said. What I 24 said, and to make clear, Commissioners, is based on our 25 filing, we're committing to staying out for the four FLORIDA PUBLIC SERVICE COMMISSION 000148 1 years through 2020 unequivocally. 2 you that anything less, we'll have to look and see what 3 the opportunity is to stay out or not. 4 Q Okay. However, I will tell And I think this is going to be my 5 final question. 6 period FPL were to earn below the authorized range for 7 its ROE, would your statement that FPL would stay out 8 until 2020 still hold true? 9 A If at any time during the four-year Again, Commissioners, based on our filing, we 10 believe we'll be able to stay out for four years. 11 committing to stay out for four years based on this 12 filing. 13 Q Okay. We're So is that a no, if the authorized ROE 14 fell below the range that's approved by the Commission, 15 you would not be staying out through 2020? Is that based on us receiving 100 percent of 16 A 17 our request? 18 Q Whatever the approved ROE is in this case, if 19 it fell below the range, are you committing -- you would 20 possibly come in and seek a base rate increase before 21 2020; would that be a true statement? 22 A Counselor, I can't answer your question. It's 23 a hypothetical that I don't know what the parameters 24 are. 25 There's nothing opaque. I'm trying to be as clear as I can on this. We are committing to a FLORIDA PUBLIC SERVICE COMMISSION 1 four-year stay out based on our filing. 2 that, we would have to see what the circumstances are at 3 the time. 4 5 MS. CHRISTENSEN: I have no You're welcome. THE WITNESS: 7 CHAIRMAN BROWN: 8 MR. MOYLE: 9 11 Thank you. further questions. 6 10 Okay. And beyond 000149 Thank you. Mr. Moyle. Thank you. EXAMINATION BY MR. MOYLE: Q Mr. Silagy, I'm a little confused by that last 12 line of questioning. I understand your proposal is a 13 four-year proposal in effect; is that right? 14 A That's correct. 15 Q And for the fourth year -- let me ask you 16 this. 17 commit to staying out for four years? 18 A If you got 98 percent of your request, would you Mr. Moyle, I don't know what the answer is, 19 whether it's 98 percent or whether it's 50 percent. 20 We'll have to look at it and see. 21 a case with a lot of thought that will hopefully give us 22 the opportunity we're committing actually to staying out 23 for four years. 24 25 Q Right. We have put together And you and I have had occasion to talk when you've been placed under oath before; right? FLORIDA PUBLIC SERVICE COMMISSION 000150 1 A Yes, we have. 2 Q And you're familiar with the Commission's use 3 of a mechanism that often times moves things along, 4 which is it directs witnesses to answer questions yes or 5 no, and then if an explanation is needed, to provide an 6 explanation. 7 8 MR. LITCHFIELD: Object to the lecture of the witness. 9 10 Are you familiar with that? MR. MOYLE: I'm just asking if he's familiar with that mechanism that the Commission uses. 11 CHAIRMAN BROWN: Just a second. Mr. Silagy, 12 are you aware that you answer yes and then you're 13 allowed an opportunity to explain your answer? 14 15 THE WITNESS: Yes, ma'am. know I believe is acceptable; is that correct? 16 CHAIRMAN BROWN: 17 THE WITNESS: 18 Yes, no, or I don't that. 19 All of those are acceptable. Thank you. I believe I said I don't know. CHAIRMAN BROWN: All right. Mr. Moyle, 20 continue, please, with your questioning. 21 BY MR. MOYLE: 22 23 Q Did you read the Prehearing Order in this case? 24 A No, not in its entirety. 25 Q So back on my pending question, you answered FLORIDA PUBLIC SERVICE COMMISSION 1 it without a yes or no. 2 97 percent of their ask, I assume that means that you 3 would not commit to staying out for four years; is that 4 correct? 5 A Yes. Just to be clear, if FPL got 000151 I am not at this time able to tell you 6 what we'll be able to stay out or not over four years, 7 anything that differs from our filing. 8 Q Okay. Thank you for that yes. 9 A You're welcome. 10 Q And in my opening statements -- a couple of 11 parties have made this. I just want to confirm. 12 testimony, as I read it, you give an overview of the 13 case; is that right? 14 A That's correct. 15 Q Okay. 16 Your So for the year 2017, you're seeking an $826 million increase; is that right? 17 A Yes. 18 Q Okay. And what day are you expecting -- or 19 asking this Commission to award, per your request, those 20 monies? 21 A When would it be effective? Well, I can't answer that with a yes or a no, 22 but I'll give you a date. 23 2017 is when we would expect the Commission to put rates 24 into effect. 25 Q Okay. It would be January 1st of And when does your current rate FLORIDA PUBLIC SERVICE COMMISSION 1 000152 agreement expire? 2 A December 31st of this year. 3 Q So that's a continuing -- there's no gap in 4 between for ratepayers to not have the new rates go into 5 effect; is that right? 6 one day and the next day you're asking for new rates; is 7 that correct? So the rate agreement ends on 8 A Yes. 9 Q And then for 2018, you're asking for another 10 270 million? 11 A Yes. 12 Q And then 2019, you're asking for 209 million? 13 A Yes, $209 million is a limited scope 14 adjustment related to Okeechobee only. 15 rate increase. 16 17 18 Q So that's more than $1.3 billion in rate increases; is that right? A Yes. I do have some exhibits. 19 MR. MOYLE: 20 CHAIRMAN BROWN: 21 MR. MOYLE: 22 No general base You didn't hear me, did you? Well, I didn't know when the right time to do that was, so -- 23 CHAIRMAN BROWN: Is it possible for you to 24 compile all of the exhibits that you plan on handing out 25 at once? FLORIDA PUBLIC SERVICE COMMISSION 000153 1 2 MR. MOYLE: Yes, I have -- they can take the box and just -- 3 CHAIRMAN BROWN: 4 MR. MOYLE: 5 Thank you. And I wasn't kidding about the box. 6 (Pause.) 7 CHAIRMAN BROWN: While Mr. Moyle is doing that 8 and our staff is so graciously all helping over there, 9 Ms. Brownless, the first exhibit number that we will be 10 marking for identification purposes I have would be 559? 11 MS. BROWNLESS: 12 CHAIRMAN BROWN: 13 MR. MOYLE: 14 Yes, ma'am. Okay. Thank you. If you would like, I can ask questions while they're being distributed. I do not like that. 15 CHAIRMAN BROWN: 16 Mr. Moyle, while they are distributing, could 17 you help identify the order in which you'd like them 18 labeled? 19 have a preference, then -- 20 We will be starting at Exhibit 559. MR. MOYLE: Sure. So if you In my box each exhibit was 21 in a folder that said one, two, three, four, five, six, 22 seven. 23 24 25 So I think I can -CHAIRMAN BROWN: on your own. I think you can recreate it The first one I had was Aviation Assets. MR. MOYLE: Aviation Assets would be one. FLORIDA PUBLIC SERVICE COMMISSION 1 Okay. CHAIRMAN BROWN: 000154 So for everybody, if 2 you can -- I know they're still being disseminated, but 3 to utilize the time wisely, we're going to label 4 Aviation Assets, the title, as 559. And then the 2016 Registered 5 MR. MOYLE: 6 Lobbyist for FPL, that's two. 7 8 560 is the 2016 Registered CHAIRMAN BROWN: Lobbyist for FPL. Yeah, 560. 9 Go ahead. 10 MR. MOYLE: And then the next one would be the 11 Percent Increase by Rate Class Sought by FPL for 2017 12 and 2018. 13 14 as 561. 561? MR. MOYLE: 16 CHAIRMAN BROWN: 17 MR. MOYLE: Yes. And then I guess 562 would be 2017 FPL Rate Increase. 19 20 That will be labeled That is the Percent Increase by Rate Class. 15 18 Okay. CHAIRMAN BROWN: CHAIRMAN BROWN: I don't have that. I don't have that. 21 MS. BROWNLESS: We don't have that one, Jon. 22 CHAIRMAN BROWN: Keep moving along, if you 23 24 25 could. MR. MOYLE: composite. I think it may have been part of a But, anyway, let's go to the next one. FLORIDA PUBLIC SERVICE COMMISSION The 1 next one I have is Customer Changes 817 to 216. 2 3 CHAIRMAN BROWN: too. MS. BROWNLESS: 5 CHAIRMAN BROWN: Sixty-two. 562. All right. I'm going to repeat all of them after we're done. 7 8 That's what I have That would be -- Customer Changes will be five -- 4 6 Yeah. 000155 MR. MOYLE: And then the next one I have is the consent order regarding cooling canals. 9 MR. WRIGHT: Madam Chairman, I do apologize, 10 but with all the papers being handed out and the 11 conversation, I either missed 562 or the Customer 12 Changes was 562 or what, but can I please have some help 13 on this? 14 CHAIRMAN BROWN: 15 MR. WRIGHT: 16 17 Yes. And I don't think I'm alone actually. CHAIRMAN BROWN: You're going to get help in 18 just a second. I'm going to get through all of the -- 19 marking them. And then we'll go through, and whatever 20 you don't have, staff will accommodate you. 21 22 23 MR. WRIGHT: All right. I'm trying to write them down on my exhibit list, so. CHAIRMAN BROWN: All right. 24 Consent Order Cooling Canals. 25 Rate FPL Increase. 563 is the We just got your 2017 It was just handed out. FLORIDA PUBLIC SERVICE COMMISSION So do you 1 want to put that -- 2 3 MR. MOYLE: Why don't we, just for ease, mark it as 561A maybe. 4 5 000156 We're going to do 564, CHAIRMAN BROWN: Mr. Moyle. Okay. 6 MR. MOYLE: 7 MS. BROWNLESS: Do we have -- can we just 8 perhaps take a minute and let all the paper get 9 distributed and then -- 10 CHAIRMAN BROWN: 11 MR. MOYLE: I thought it was. All right. I got 564 on that. 12 And then I have the Consent Order. 13 you've marked that. 14 CHAIRMAN BROWN: 15 MR. MOYLE: 16 What's 565? of -CHAIRMAN BROWN: 18 MR. MOYLE: 20 563, yeah. And then that is a case, the case 17 19 You've -- I think Miami-Dade. -- Miami-Dade County v. Florida Power & Light. CHAIRMAN BROWN: Okay. And then the last one 21 is the ROE Adder that we have, 566; is that correct? 22 Mr. Moyle? Yes. 23 MR. MOYLE: 24 CHAIRMAN BROWN: 25 Is that correct? going to go over this for all the parties. FLORIDA PUBLIC SERVICE COMMISSION Okay. I'm And, again, 000157 1 it would be very helpful if you have them organized 2 upfront when you cross-examine a witness, very helpful, 3 rather than stopping every time you have an exhibit. 4 this will help ease. 5 this process, so I thank you all for bearing with us on 6 this. 7 parties if we get it as we progress. And Mr. Moyle just was notified of It will make it a lot more easier for all the So 559 is the Aviation Assets. 8 9 So 2016 Registered Lobbyist for FPL. 560 is the 561 is the Percent 10 Increase by Rate Class Sought by FPL for 2017 and 2018. 11 562 are the Customer Changes 815 to 216. 12 Consent Order Cooling Canals. 13 Increase. 14 last one is 566, which is the ROE Adder Affecting 15 Performance. 17 564 is the 2017 FPL Rate 565 is the Miami-Dade County case. Mr. Moyle, is that correct? 16 have? 563 is the Okay. Is that what you Sorry for making you do this. No, I think we're right. 18 MR. MOYLE: 19 CHAIRMAN BROWN: 20 (Exhibits 559 through 566 marked for 21 And the I'm right. Okay. identification.) 22 MR. MOYLE: I'm not -- there may be -- 23 depending on his answers, I may not use some of them, 24 but -- 25 CHAIRMAN BROWN: All right. Thank you. FLORIDA PUBLIC SERVICE COMMISSION Now 000158 1 does anybody have any problems or missing any of these 2 exhibits? 3 And when we take lunch, I hope you all take an 4 opportunity to organize your exhibits so that it becomes 5 a little bit easier in this process. 6 squared away here? 7 Ms. Brownless, are you squared? Does everybody have them before we proceed? Staff, are you squared away? 8 MS. BROWNLESS: 9 Yes, ma'am. 10 11 One second and I can tell you. Thank you. CHAIRMAN BROWN: Mr. Moyle, are I am. MR. MOYLE: 13 CHAIRMAN BROWN: Mr. Silagy, are you ready to proceed? Yes, ma'am. 15 THE WITNESS: 16 CHAIRMAN BROWN: 17 have the floor, Mr. Moyle. 18 BY MR. MOYLE: 19 All right. you ready to proceed? 12 14 So everybody Q Thank you. All right. You So, Mr. Silagy, I want to just understand, you 20 know, your understanding of what is in this case and 21 what's not in this case in terms of what you're asking 22 this Commission to award rates for. 23 MR. LITCHFIELD: 24 25 Is that fair? No, it's not. I object. It's a very vague question. CHAIRMAN BROWN: Mr. Moyle. FLORIDA PUBLIC SERVICE COMMISSION 000159 1 MR. MOYLE: Well, the question is designed to 2 test his knowledge as to what FPL is seeking from you 3 all. 4 CHAIRMAN BROWN: 5 the question. 6 BY MR. MOYLE: 7 8 Q All right. I'll allow it. I'll allow So the exhibit that's been marked as 559, do you have that in front of you? 9 MR. LITCHFIELD: I'm sorry. 10 CHAIRMAN BROWN: There was no answer. 11 MR. LITCHFIELD: There was a question pending, 12 and I did not hear an answer. 13 MR. MOYLE: 14 CHAIRMAN BROWN: 15 ask -- 16 BY MR. MOYLE: 17 Q Oh, I'm sorry. Mr. Silagy, you're allowed to I asked you if it was to fair to ask you 18 questions about your knowledge as to what FPL was asking 19 for for recovery in this case as compared to what 20 they're not asking for recovery for in this case? 21 MR. LITCHFIELD: And I objected to that 22 question on form, and then Mr. Moyle reformulated his 23 question and said, "What is FPL asking for in this 24 case?" 25 prepared to answer. That's the question I thought Mr. Silagy was FLORIDA PUBLIC SERVICE COMMISSION 000160 1 MR. MOYLE: Well, if that was my question, I 2 strike it. 3 whether he is comfortable with me asking him questions 4 about whether he knows what FPL is asking you all to 5 award as compared to what he's not asking you all to 6 award. 7 Because what I'm trying to ask him is CHAIRMAN BROWN: I think that's fair game to 8 ask him based on his knowledge. 9 proceed. 10 11 So, Mr. Moyle, you may Can you restate the question, though? BY MR. MOYLE: Q Okay. Well, I think the question I tried to 12 ask was whether that was -- he thought that was fair for 13 me to ask those questions of him. 14 pending questions. 15 A I think that was the Do you think that's fair? I don't know what you're going to ask, so I 16 can't tell you if it's fair. 17 will do my best to answer your questions about what's in 18 this proceeding. 19 Q Okay. But I can tell you that I But generally speaking, to prepare for 20 your testimony, you're familiar with the rate case, are 21 you not? 22 A Yes, I am, generally speaking. 23 Q And, you know, dollars are important, so 24 you're also, you're familiar with the dollars that 25 you're requesting and some of the major components and FLORIDA PUBLIC SERVICE COMMISSION 1 what's in and what's out; fair? 2 A Yes, generally speaking, that's correct. 3 Q So the first Exhibit I handed you is -- has 4 been marked as 559. 5 Do you have that? 6 A 7 000161 It's been entitled Aviation Assets. Yes. MR. LITCHFIELD: Madam Chair, I hesitate to 8 jump in at this point, but I think my objection or the 9 basis for my objection might inform process moving 10 11 forward. Mr. Silagy has sponsored, and I think we were 12 asked and did a very careful effort to identify by 13 witness who sponsored particular responses to 14 interrogatories and production requests in this case. 15 Mr. Silagy has sponsored a grand total of three, and 16 this is not on the list. 17 sponsored by Ms. Ousdahl. 18 of getting through in the allotted time, asking the 19 right question of the right witness is going to be very, 20 very important for us. 21 CHAIRMAN BROWN: In fact, Exhibit 559 is And I think in the interest I agree, but I don't know 22 where Mr. Moyle is going with those questions and as 23 they pertain to his direct testimony. 24 MR. LITCHFIELD: 25 MR. MOYLE: Fair enough. And if he doesn't know, he can FLORIDA PUBLIC SERVICE COMMISSION 1 just say, "I don't know," you know. 2 BY MR. MOYLE: 3 4 Q 000162 So you have before you an exhibit that's been marked as 559; is that right? 5 A Yes. 6 Q Okay. And it has a number of items in here. 7 There's yellow highlighting in there. I'll represent to 8 you that that is mine. 9 "Aviation asset transfers in 2011, FPL recorded a gain I'll just read it, but it says, 10 of 6.15 million as a result of transferring its aviation 11 assets to its parent, NextEra. 12 transferred assets, related assets, and the sale of a 13 purchase contract for an aircraft under construction 14 amounted to 33.462 million. 15 difference between the appraised value of transferred 16 assets and net book value was deferred and has been 17 amortized into income over a five-year period consistent 18 with FPSC order referenced above." 19 understanding as to what I just read and what's on this 20 exhibit means? 21 22 23 24 25 A The book value of the The resulting gain for the Do you have an I'm not familiar with this. I'm sure Witness Ousdahl can answer that question for you. Q Okay. So you don't know whether FPL -- CHAIRMAN BROWN: Asked and answered. BY MR. MOYLE: FLORIDA PUBLIC SERVICE COMMISSION 1 2 Q Okay. 000163 Do you -- does FPL currently make use of aviation assets? 3 A Yes. 4 Q How so? 5 A How so? 6 Q And which aircraft are you referencing? 7 A It depends on the aircraft. 8 By flying on the aircraft. We have a helicopter as well as fixed-wing. 9 Q As well as what? 10 A Aircraft, fixed-wing. 11 Q What kind of fixed-wing aircraft. 12 A A jet fixed-wing aircraft. 13 Q Falcons? 14 A Yes. 15 MR. LITCHFIELD: May I -- excuse me. May I 16 ask Mr. Moyle to point to the issue in this case to 17 which this line of questioning is relevant, whether 18 there is any representation in the company's filing as 19 to whether these assets are in the requested cost of 20 service before we proceed to go down this path? 21 CHAIRMAN BROWN: 22 MR. MOYLE: Mr. Moyle? Well, sure. So I think you all 23 are being asked to look at things and say, "Should we 24 allow recovery of these?" 25 flying around on Falcon jets and helicopters, is that I want to ask him if they're FLORIDA PUBLIC SERVICE COMMISSION 000164 1 part of their ask here and are they seeking money from 2 the ratepayers for that or not? 3 my next question before the objection. 4 CHAIRMAN BROWN: So that was going to be Mr. Moyle, but it has to 5 related to his pre -- direct testimony. 6 point me in the direction of where that discussion is? 7 MR. MOYLE: Okay? Can you Well, he's asking -- he's -- on 8 behalf of the company, has an overview of the case, and 9 he's asking for 1.3 billion plus. And I just wanted him 10 to answer whether expenses for aircraft and jets are 11 part of the ask. 12 It's a yes or no question. CHAIRMAN BROWN: It is a yes or no question, 13 but I believe he already indicated that another witness 14 was more appropriate for that question. 15 may be restating his -- 16 MR. LITCHFIELD: I could be -- I And even if Mr. Silagy is 17 able to answer this particular question, what it amounts 18 to from Mr. Moyle's perspective is that he ought to be 19 able to ask Mr. Silagy with respect to each and every 20 cost component that may or may not be in the filing 21 whether Mr. Silagy is aware of whether it's in there or 22 not. 23 are absolutely poised to answer those questions. 24 25 There are many witnesses to come in this case who MR. MOYLE: Right. But it's not a valid objection for him to work on my trial strategy and say, FLORIDA PUBLIC SERVICE COMMISSION 000165 1 "Mr. Moyle, you should ask Ms. Ousdahl that question 2 rather than Mr. Silagy." 3 asking ratepayers to pay for, you know, flying on 4 corporate jets, he can say, "Yes, Mr. Moyle, we think 5 it's an efficient use of time for us to go use corporate 6 aircraft," or he can say, "No, we're not making that 7 ask. We put it below the line." 8 9 If he knows whether they're CHAIRMAN BROWN: asking. I understand what you're Thank you. 10 Legal, I do believe he's going down a stream 11 of questions that are outside of his direct testimony, 12 and that is a slippery slope. 13 MR. MOYLE: 14 MS. HELTON: It's a puddle. I'm sorry. I didn't -- I don't 15 know if I want to know, but I didn't hear Mr. Moyle's 16 last comment. 17 18 MR. MOYLE: I only have three questions on -- in these areas. 19 MS. HELTON: Madam Chairman, it is a slippery 20 slope. You do have the discretion to allow the 21 intervenors and FPL to go beyond the scope of the 22 cross-examination that's filed. 23 witnesses here, and I'm not sure where exactly this is 24 going. 25 questions and then we can move on. But we do have a lot of Maybe Mr. Moyle can ask a couple of more FLORIDA PUBLIC SERVICE COMMISSION 000166 1 2 CHAIRMAN BROWN: a little bit. 3 4 5 I'll give you some latitude, MR. MOYLE: Okay. BY MR. MOYLE: Q Is FPL -- do you have an understanding whether 6 FPL is asking the ratepayers to pay for the use of 7 corporate aircraft in this case? 8 9 10 11 A No, I'm not aware of any aircraft expenses being included in this rate case, but Witness Ousdahl can provide you any details. Q So are you telling me that it's not, or just 12 that you're not 100 percent sure and I should ask 13 Ms. Ousdahl? 14 A Mr. Moyle, I told you that I don't believe 15 there are any aviation expenses included in this rate 16 case, and Ms. Ousdahl will be able to answer that in 17 more detail. 18 Q Okay. Same question with respect to political 19 activity. You all have a number of lobbyists that you 20 employ, 34 or so; is that right? I don't know the number of lobbyists, 21 A 22 Mr. Moyle. 23 Q You want to go to Exhibit No. 560? 24 A I'm there. 25 Q How many does the Florida Legislature 2016 FLORIDA PUBLIC SERVICE COMMISSION 1 registrations by principal name reflect? 2 3 A According to this exhibit, 34, if your numbering is correct. 4 5 Q Okay. And you -- I assume you know some people on this list; is that right? 6 A They're employees on this list. 7 Q Okay. 8 000167 And then there's some contract people as well; right? 9 A Yes, there are. 10 Q Okay. 11 A I can't tell you the accuracy of this list. Does it look accurate to you? 12 I've not seen this document before. 13 MR. LITCHFIELD: Madam Chair, is it 14 Mr. Moyle's contention that these costs are reflected in 15 rates, or is he simply asking the witness whether they 16 are? I'm asking the witness. 17 MR. MOYLE: 18 MR. LITCHFIELD: 19 BY MR. MOYLE: 20 Q 21 rates? 22 A 23 Okay. know. So do you know whether these are included in No, they are not included in rates as far as I All political expenses are below the line. 24 Q But I should check with Ms. Ousdahl on that? 25 A I would -- you're welcome to ask Ms. Ousdahl FLORIDA PUBLIC SERVICE COMMISSION 1 000168 that as well. Okay. 2 Q 3 Madam Chair. How about -- and this is the last line, The memberships and associations that perform 4 5 lobbying functions such as Associated Industries, do you 6 know whether you're asking the ratepayers to pay for 7 FPL's membership in associations like Associated 8 Industries, who's -- one of their main objectives is to 9 engage in lobbying? 10 A Do you know, yes or no? No, I do not know whether they're included. 11 believe they are not, but Ms. Ousdahl can -- Witness 12 Ousdahl can answer that for you. 13 Q Okay. I I want to switch topics a little bit, 14 and to your pleasure, I mean, I'm switching -- I do have 15 some questions with him, so do you want me to just plow 16 through or do you want to take a break? 17 18 CHAIRMAN BROWN: I'm anticipating we take lunch about 12:30, so you've got about 15 more minutes. 19 MR. MOYLE: Okay. I have various lines of 20 questions, so I'll shoot for a 12:30 break point. 21 BY MR. MOYLE: 22 Q Okay. 23 A We are a regulated monopoly in Florida. 24 25 Mr. Silagy, FPL is a monopoly; correct? That's correct. Q And that means that other companies, other FLORIDA PUBLIC SERVICE COMMISSION 000169 1 electric companies can't compete for your customers by 2 offering them lower energy or other incentives; is that 3 correct? 4 A Yes, Commissioners. 5 things. 6 components to it such as a duty to serve as well. 7 Q That's one component. It means a variety of It obviously has other And you would agree that being a monopoly 8 significantly lowers FPL's business risk, all other 9 things being equal; correct? No, I don't know that I can actually agree 10 A 11 with that. 12 are required to do also creates its own set of risks. 13 14 Q I think our duty to serve and the -- what we And did you understand my question when I said "all things being equal," what that means? 15 A No, I guess I don't understand that. 16 Q Okay. So that -- I'm trying to ask the 17 question just to isolate on one piece, and so I know you 18 guys have a nuclear plant and there's some risk 19 associated with that. 20 everything else aside and focus on the idea of a 21 competitive market as compared to a monopoly, and I'm 22 asking you if you can agree that having a monopoly is a 23 lower risk profile, all things being equal, as compared 24 to being in a competitive market? 25 I'm asking you to just put MR. LITCHFIELD: Madam Chair, I think FLORIDA PUBLIC SERVICE COMMISSION 000170 1 Mr. Moyle is getting into areas that are directly 2 addressed in direct and in rebuttal by other witnesses 3 in this case. 4 testimony that relates to cost of equity or risk factors 5 associated with cost of equity. (Transcript continues in sequence in Volume 6 7 I don't see anything in Mr. Silagy's 2.) 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 FLORIDA PUBLIC SERVICE COMMISSION 1 STATE OF FLORIDA 2 COUNTY OF LEON ) : ) 000171 CERTIFICATE OF REPORTER 3 4 5 6 7 8 9 10 11 12 13 I, LINDA BOLES, CRR, RPR, Official Commission Reporter, do hereby certify that the foregoing proceeding was heard at the time and place herein stated. IT IS FURTHER CERTIFIED that I stenographically reported the said proceedings; that the same has been transcribed under my direct supervision; and that this transcript constitutes a true transcription of my notes of said proceedings. I FURTHER CERTIFY that I am not a relative, employee, attorney or counsel of any of the parties, nor am I a relative or employee of any of the parties' attorney or counsel connected with the action, nor am I financially interested in the action. DATED THIS 23rd day of August, 2016. 14 15 __________________________________ 16 LINDA BOLES, CRR, RPR FPSC Official Hearings Reporter (850) 413-6734 17 18 19 20 21 22 23 24 25 FLORIDA PUBLIC SERVICE COMMISSION