FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION AND, IF
Smith, Staff Attorney, Oakland, California, Diana A. Csank
and Julie Kaplan, Staff Attorneys, Sierra Club, Washington,
District of Columbia, for Appellant
C. Hetrick, General Counsel, Samantha M. Cibula, Attorney
Supervisor, and Rosanne Gervasi, Senior Attorney, Florida
Public Service Commission, Tallahassee, Florida, for Appellee
Florida Public Service Commission
Kelly, Public Counsel, Patricia A. Christensen, Associate
Public Counsel, and Charles J. Rehwinkel, Deputy Public
Counsel, Office of Public Counsel, The Florida Legislature,
Tallahassee, Florida, for Appellee Citizens of the State of
H. Singer of Boies Schiller Flexner LLP, Fort Lauderdale,
Florida; and John T. Butler, Assistant General Counsel -
Regulatory, and María José Moncada, Senior
Attorney, Florida Power & Light Company, Juno Beach,
Florida, for Appellee Florida Power & Light Company
Scheffel Wright and John Thomas LaVia III of Gardner, Bist,
Bowden, Bush, Dee, LaVia & Wright, P.A., Tallahassee,
Florida, for Appellee Florida Retail Federation
S. Mills and Courtney Brewer of The Mills Firm, P.A.,
Tallahassee, Florida, for Amicus Curiae City of South Miami
Swim of Debra Swim, Attorney, PLLC, Tallahassee, Florida, for
Amicus Curiae League of Women Voters of Florida, Inc.
case is before the Court on appeal from a decision of the
Florida Public Service Commission (the Commission), relating
to the rates or service of a public utility providing
electric service. Specifically, Sierra Club, Appellant,
challenges the Commission's decision in In re
Petition for Rate Increase by Florida Power & Light
Co., Order No. PSC-16-0560-AS-EI, 2016 WL 7335779 (Fla.
P.S.C. Dec. 15, 2016) (the Final Order), which approved a
nonunanimous settlement agreement between certain
parties. We have jurisdiction. See art. V,
§ 3(b)(2), Fla. Const.; § 366.10, Fla. Stat.
(2017). For the following reasons, we hold that the
Commission applied the appropriate standard of review in the
Final Order, and competent, substantial evidence supports
AND PROCEDURAL BACKGROUND
March 2016, FPL made three filings with the Commission: (1) a
petition for a base rate increase and a limited-scope
adjustment (the Rate Petition); (2) depreciation and
dismantlement studies; and (3) a petition for approval of
FPL's storm-hardening plan. One month later, FPL filed a
petition to modify and continue its asset optimization
incentive mechanism. In May 2016, the Commission consolidated
these four dockets for discovery and hearing (collectively
the Rate Case). After adjustments, FPL revised its request in
the Rate Petition to the following: (1) an increase in rates
and charges sufficient to generate additional total revenues
of $826 million in 2017; (2) a subsequent revenue increase of
$270 million in 2018; and (3) a $209 million limited-scope
adjustment for the Okeechobee Clean Energy Center effective
on its commercial in-service date, which was scheduled for
2019. In the Rate Petition, FPL requested a rate of return on
equity (ROE) within a range of 10.5 to 12.5 percent, with a
midpoint of 11.5 percent.
intervenors, including Sierra Club, participated in the Rate
Case.After discovery, the Commission held an
evidentiary hearing from August 22 to September 1, 2016 (the
August Hearing). In total, the Commission identified 167
issues in its prehearing order to be addressed at the August
Hearing. On appeal, Sierra Club only challenges one of those
issues-was "FPL's replacement of its peaking units
reasonable and prudent?" During the August Hearing,
thirty-five witnesses testified and over 800 exhibits were
entered into evidence.
the Rate Case, FPL sought to recover costs for its Peaker
Replacement Project (the Peaker Project). Sierra Club
intervened to challenge the prudence of the Peaker Project,
arguing that it was unreasonable, unnecessary, and more
expensive than renewable alternatives. The Peaker Project,
which FPL had completed in 2016, consisted of replacing
forty-four of FPL's forty-eight gas turbine (GT) peaking
units with seven combustion turbine (CT) peaking units. As a
result, FPL replaced smaller 1970s vintage GTs with newer,
larger, and more fuel-efficient CTs. Both the GTs and CTs run
on natural gas. The CTs require auxiliary power for
starting purposes and FPL retained four GTs for the
black-start capability. The engines of the replaced GTs were
originally designed in approximately 1958 for Boeing
aircraft. Correspondingly, manufacturers no longer fabricate
these types of units; thus replacement parts for the GTs are
difficult to obtain. On one occasion, when a GT torque
converter failed, FPL was forced to simply retire the unit
rather than employ a manufacturer to reverse engineer the
replacement part due to the high cost and twelve-month lead
are actually "reliability units, " serving two
important functions for FPL: meeting heightened customer
demand and providing power when a utility loses base load
generation. FPL deploys its peakers during peak demand-the
single hour of highest energy usage per day each
year. Yet meeting peak demand is not the only
function of peakers. FPL also utilizes these units outside of
summer and winter peak demand periods during emergencies such
as extreme weather, unusual demand, or equipment failures.
Importantly, peakers must be brought online quickly-within
fifteen or thirty minutes. For these reasons, FPL cannot use
solar power for its peaking units.
total cost of the Peaker Project was $725.6 million. Of the
Rate Petition's 2017 revenue request, the Peaker Project
accounted for $92 million of that rate increase.
Nevertheless, according to FPL estimates, the Peaker Project
will result in $203 million in net customer savings, partly
due to the CTs' lower emissions and better heat rate.
the Rate Case, several parties continued to explore the
possibility of a settlement. On October 6, 2016, FPL and
three intervenors-OPC, SFHHA, and FRF (collectively the
Signatories)-executed a settlement agreement. This settlement
resolved all outstanding issues in the Rate Case, including
the issue related to the prudence of the Peaker Project.
FIPUG took no position on the settlement; Walmart and FEA did
not oppose it. Conversely, Sierra Club, AARP, and the Larsons
opposed the settlement agreement.
settlement agreement, FPL made various concessions from its
revised Rate Petition: (1) a 2017 revenue increase of $400
million (down from $826 million); (2) a 2018 revenue increase
of $211 million (down from $270 million); and (3) a $200
million limited-scope adjustment effective on the in-service
date of the Okeechobee unit (down from $209 million).
Further, the ROE midpoint was set at 10.55 percent within a
9.6 to 11.6 percent range (down from an 11.5 percent midpoint
within a 10.5 to 12.5 percent range). In total, the
settlement agreement represented a total revenue increase of
about $2 billion less than FPL's original Rate Petition.
Finally, the minimum term of the settlement agreement runs
from January 1, 2017, until December 31, 2020.
settlement agreement covered additional terms that are not
directly relevant in this case. Two of the terms concerned
renewable energy: (1) the authorization for FPL to construct
up to 1200 megawatts (MW) of solar power generation by the
end of 2021 with costs recoverable upon the unit in-service
date if they are cost-effective through the Solar Base Rate
Adjustment (SoBRA); and (2) the requirement that FPL
implement a fifty MW battery storage pilot program with no
cost-effective restriction. The settlement agreement was in
the form of a "black box" resolution; thus the
parties agreed on the total cost of service, but did not
specifically assign amounts to line items or costs.
the parties filed the settlement agreement, the Commission
reopened the record, affording an opportunity for
participants to provide supplemental testimony and exhibits,
conduct discovery, and address the terms of the settlement
agreement not discussed at the August Hearing. Thus the
Commission scheduled another hearing for October 27, 2016
(the October Hearing). The Commission determined that the
"sole issue to be decided in this hearing [wa]s whether
the Settlement Agreement dated October 6, 2016, is in the
public interest and should be approved."
October Hearing, five witnesses testified. Subsequently, the
Commission reconvened to consider the settlement agreement.
After deliberation, the Commission unanimously approved the
settlement agreement in its entirety. The Commission later
memorialized its findings and conclusions in the Final Order.
Specifically, the Commission stated that its "standard
for approval of a settlement agreement is whether it is in
the public interest." The Commission found "that
taken as a whole the settlement provides a reasonable
resolution of all the issues raised in the consolidated
dockets." Finally, it found "that the Settlement
Agreement establishes rates that are fair, just, and
reasonable and is in the public interest."
this dispute centers upon whether the Commission properly
applied its public interest standard in considering and
approving the settlement. Sierra Club contends that it was
necessary to independently apply a prudence standard to the
Peaker Project individually; whereas, the Commission asserts
that it correctly applied its public interest standard to the
settlement agreement as a whole. As demonstrated below, we
agree with the Commission.
Standard of Review
reviewing an order of the Commission, this Court affords
great deference to the Commission's findings."
Citizens of State v. Fla. Pub. Serv. Comm'n
(Citizens I), 146 So.3d 1143, 1149 (Fla. 2014).
"Commission orders come to this Court clothed with the
presumption that they are reasonable and just." W.
Fla. Elec. Coop. Ass'n v. Jacobs, 887 So.2d 1200,
1204 (Fla. 2004). "To overcome these presumptions, a
party challenging an order of the Commission on appeal has
the burden [to] show a departure from the essential
requirements of law and the legislation controlling the
issue, or that the findings of the Commission are not
supported by competent, substantial evidence." Crist
v. Jaber, 908 So.2d 426, 430 (Fla. 2005). "We will
not overturn an order of the PSC because we would have
arrived at a different result had we made the initial
decision and we will not reweigh the evidence." Gulf
Power Co. v. Fla. Pub. Serv. Comm'n, 453 So.2d 799,
803 (Fla. 1984).
the Commission is afforded leeway in its proceedings,
deference cannot be accorded if the Commission exceeds its
authority. United Tel. Co. of Fla. v. Fla. Pub. Serv.
Comm'n, 496 So.2d 116, 118 (Fla. 1986). As the
threshold issue, we must first establish the grant of
legislative authority to act since the Commission derives its
power solely from the Legislature. Id. Therefore,
"[w]hether the PSC has the authority to act is a
question of law, which is subject to de novo review."
Citizens of State v. Graham (Citizens II),
191 So.3d 897, 900 (Fla. 2016); see also §
120.68(7)(d), Fla. Stat. (2017). This issue involves the
Commission interpreting section 366.06(1), Florida Statutes
(2017), which it is tasked with enforcing; therefore, its
interpretation "is entitled to great deference and will
be approved by this Court unless it is clearly
erroneous." BellSouth Telecomm., Inc. v.
Johnson, 708 So.2d 594, 596 (Fla. 1998).
Commission's Appropriate Standard
to section 366.06(1), Florida Statutes, the Commission
"shall have the authority to determine and fix fair,
just, and reasonable rates that may be requested . . . by any
public utility for its service." Id. §
366.06(1). As part of these base rate cases, utilities may
seek to recover costs for capital investments in
power-generating facilities. See Citizens of State v.
Graham (FPUC), 213 So.3d 703, 716-17 (Fla.
2017); Citizens II, 191 So.3d at 900-01;
Citizens of State v. Fla. Pub. Serv.
Comm'n, 435 So.2d 784, 785 (Fla. 1983). Section
366.06 details the Commission's procedures for
ratemaking, and it expressly contemplates cost recovery for
The [C]ommission shall investigate and determine the actual
legitimate costs of the property of each utility company,
actually used and useful in the public service, and shall
keep a current record of the net investment of each public
utility company in such property which value, as determined
by the [C]ommission, shall be used for ratemaking purposes
and shall be the money honestly and prudently invested by the
public utility company in such property used and useful in
serving the public, less accrued depreciation . . . .
§ 366.06(1), Fla. Stat. It is from this statute that the
Commission derives its prudence standard, which it applies to
ensure that the recovered costs result from prudent
investments. See S. All. for Clean Energy v. Graham
(SACE), 113 So.3d 742, 749-50 (Fla. 2013); Fla.
Power & Light v. Beard, 626 So.2d 660, 662 (Fla.
1993). Within a rate case, the Commission applies this
prudence standard to the individual investment projects for
which a utility is seeking cost recovery. SeeBeard, 636 So.2d at 662; Shevin v.
Yarborough, 274 So.2d 505, 509-10 (Fla. 1973). Here the
Commission acknowledges that it would have been proper to