Florida Public Service Commission native order document 03911-2024

FILED 5/23/2024
DOCUMENT NO. 03911-2024
FPSC - COMMISSION CLERK
BEFORE THE FLORIDA PUBLIC SERVICE COMMISSION
In re: Petition for approval of change in rate
used to capitalize allowance for funds used
during construction from 6.00% to 7.08%,
effective January 1, 2024, by Peoples Gas
DOCKET NO . 20240035-GU
ORDER NO. PSC-2024-0168-PAA-GU
ISSUED: May 23, 2024
S stem, Inc.
The following Commissioners participated in the disposition of this matter:
MIKE LA ROSA, Chairman
ART GRAHAM
GARY F. CLARK
ANDREW GILES FAY
GABRIELLA PASSIDOMO
NOTICE OF PROPOSED AGENCY ACTION
ORDER APPROVING PEOPLE GAS SYSTEM, INC. 'S
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION RA TE
BY THE COMMISSION:
NOTICE is hereby given by the Florida Public Service Commission that the action
discussed herein is preliminary in nature and will become final unless a person whose interests
are substantially affected files a petition for a formal proceeding, pursuant to Rule 25-22.029,
Florida Administrative Code (F.A.C.).
Background
Peoples Gas System, Inc. (PGS or Company) current Allowance for Funds Used During
Construction (AFUDC) rate of 6.00 percent was approved by Order No. PSC-2021-0170-PAA-
GU, issued May 14, 2021. 1 On February 16, 2024, PGS filed a petition for approval to change its
AFUDC rate from 6.00 percent to 7.08 percent, effective January 1, 2024. As required by Rule
25-7.0141(5), F.A.C., PGS filed with its petition Schedules A, B, and C identifying the capital
structure, capital structure adjustments, and the methodology used to calculate the monthly
AFUDC rate. We have jurisdiction over this matter pursuant to Chapter 366, Florida Statutes
(F.S.), including Sections 366.04, 366.05, and 366.06, F.S.
1Order No. PSC-2021-0170-PAA-GU, issued May 14 , 2021 , in Docket No . 20210040-G U, In r e: Request f or
approval of change in rate used to capitalize allowan ce/o r funds used during construction (A FUDC) f rom 5. 97% to
6.00%, effective J/ // 2/ , by Peoples Gas System.

ORDER NO. PSC-2024-0168-PAA-GU
DOCKET NO. 20240035-GU
PAGE2
Decision
I. 	AFUDC Rate
PGS requested an increase in its AFUDC rate from 6.00 percent to 7.08 percent. Rule 25-
7.0141(3), F.A.C., Allowance for Funds Used During Construction, provides the following
guidance:
(3) The applicable AFUDC rate will be determined as follows:
(a) The most recent 13-month average embedded cost of capital, except as noted
below, must be derived using all sources of capital and adjusted using adjustments
consistent with those used by the Commission in the Company's last rate case.
(b) The cost rates for the components in the capital structure will be the midpoint
of the last allowed return on common equity, the most recent 13-month average
cost of short-term debt and customer deposits and a zero cost rate for deferred
taxes and all investment tax credits. The cost of long-term debt and preferred
stock will be based on end of period cost. The annual percentage rate will be
calculated to two decimal places.
In support of its requested AFUDC rate of 7.08 percent, PGS provided its calculations
and capital structure in Schedules A and B attached to its request. We reviewed the schedules
and determined that the proposed rate was calculated in accordance with Rule 25-7.0141(3),
F.A.C. The requested increase in the AFUDC rate is due to an increase of 27 basis points in the
weighted cost of long-term debt, an increase of 57 basis points in the weighted cost of short-term
debt, and an increase of 26 basis points in the weighted cost of common equity, offset by a 2
basis point decrease in the weighted cost of customer deposits. PGS's cost rate for short-term
debt increased from 1.16 percent in 2020 to 5.84 percent in 2023. Over the same period, PGS's
cost rate for long-term debt increased from 4.69 percent to 5.68 percent. The debt cost rate
increases were primarily due to market conditions and the Federal Open Market Committee
raising interest rates. In its calculation, the Company appropriately used the mid-point return on
equity of 10.15 percent, which was approved by Order No. PSC-2023-0388-FOF-GU. 2
Based on our review, the requested increase in the AFUDC rate from 6.00 percent to 7.08
percent is appropriate and consistent with Rule 25-7.0141, F.A.C. It is therefore approved.
II. 	Monthly Compounding Rate
PGS also requested a monthly compounding rate of 0.005717 to achieve an annual
AFUDC rate of 7.08 percent. 	In support of the requested monthly compounding rate of
0.005717, the Company provided its calculations in Schedule C attached to its request. Rule 25-
2 Order No. PSC-2023-0388-FOF-GU, issued December 27, 2023, in Docket No. 20230023-GU, In re: Petition for
rate increase by Peoples Gas System. Inc.

ORDER NO. PSC-2024-0168-PAA-GU
DOCKET NO. 20240035-GU
PAGE3
7.0141(4)(a), F.A.C., provides the following formula for discounting the annual AFUDC rate to
reflect monthly compounding.
M = [((1 + A/100)) / 12)-1] x 100
Where: M = discounted monthly AFUDC rate
A = annual AFUDC rate
The rule also requires that the monthly compounding rate be calculated to six decimal
places.
We reviewed the Company's calculation and determined it was derived in accordance
with Rule 25-7.0141(4), F.A.C., as presented in Attachment 2. Therefore, we approve a monthly
compounding AFUDC rate of 0.005717.
III. 	Effective Date
PGS ' s requested AFUDC rate was calculated using the most recent 13-month average
capital structure for the period ended December 31 , 2023. Rule 25-7.0141 (6), F.A.C., provides
that:
No utility may charge or change its AFUDC rate without prior Commission
approval. The new AFUDC rate will be effective the month following the end of
the 12-month period used to establish that rate and may not be retroactively
applied to a previous fiscal year unless authorized by the Commission.
The 	Company's 	requested 	effective 	date 	of January 	l , 	2024, 	complies 	with 	the
requirement that the effective date does not precede the period used to calculate the rate, and
therefore, is approved.
Based on the foregoing, it is
ORDERED by the Florida Public Service Commission that Peoples Gas System, Inc. ' s
Allowance for Funds Used During Construction rate shall be 7.08 percent based on a 13-month
average capital structure for the period ended December 31, 2023. It is further
ORDERED that the appropriate compounding rate to achieve an annual AFUDC rate of
7.08 percent is 0.005717. It is further
ORDERED that the AFUDC rate shall be effective January l, 2024, for all purposes. It is
further
ORDERED that the provisions of this Order, issued as proposed agency action, shall
become final and effective upon the issuance of a Consummating Order unless an appropriate
petition, in the form provided by Rule 28-106.201, Florida Administrative Code, is received by

ORDER NO. PSC-2024-0168-PAA-GU
DOCKET NO. 20240035-GU
PAGE4
the Commission Clerk, 2540 Shumard Oak Boulevard, Tallahassee, Florida 32399-0850, by the
close of business on the date set forth in the "Notice of Further Proceedings" attached hereto. 	It
is further
MRT
ORDERED that in the event this Order becomes final, this docket shall be closed.
By ORDER of the Florida Public Service Commission this 23rd day of May, 2024.
Com 	issio
Florida Public Service Commission
2540 Shumard Oak Boulevard
Tallahassee, Florida 32399
(850) 413-6770
www.floridapsc.com
Copies furnished: 	A copy of this document is
provided to the parties of record at the time of
issuance and, if applicable, interested persons.

ORDER NO. PSC-2024-0168-PAA-GU
DOCKET NO. 20240035-GU
PAGES
NOTI CE OF FURTHER PROCEEDINGS OR JUDICIAL REVIEW
The Florida Public Service Commission is required 	by Section 	120.569( l ), Florida
Statutes, to notify parties of any administrative hearing that is available under Section 120.57,
Florida Statutes, as well as the procedures and time limits that apply. This notice should not be
construed to mean all requests for an administrative hearing will be granted or result in the relief
sought.
Mediation may be available on a case-by-case basis. 	If mediation is conducted, it does
not affect a substantially interested person's right to a hearing.
The action proposed herein is preliminary in nature. Any person whose substantial
interests are affected by the action proposed by this order may file a petition for a formal
proceeding, in the form provided by Rule 28-106.20 I, Florida Administrative Code. 	This
petition must be received by the Office of Commission Clerk, 2540 Shumard Oak Boulevard,
Tallahassee, Florida 32399-0850, by the close of business on June 13, 2024.
In the absence of such a petition, this order shall become final and effective upon the
issuance of a Consummating Order.
Any objection or protest filed in this/these docket(s) before the issuance date of this order
is considered abandoned unless it satisfies the foregoing conditions and is renewed within the
specified protest period.

ORDER NO. PSC-2024-0168-PAA-GU
DOCKET NO. 20240035-GU
PAGE6
PEOPLES GAS SYSTEM, lNC.
Attachment I
CAPITAL STRUCTURE USED FOR THE REQUESTED AFUDC RA TE
as of December 31, 2023
COMMISSION APPROVED
WEIGHTED
CAPITAL 	JURJSDICTIONAL 	CAPITAL 	COST OF 	COST OF
COMPONENTS 	AVERAGE 	RATIO 	CAPITAL 	CAPITAL
COMMON EQUITY 	$942,550,797 	47.40% 	10.15% 	4.81%
LONG-TERM DEBT 	$543,872,462 	27.35% 	5.68% 	1.55%
SHORT-TERM DEBT 	$236,704,341 	11.89% 	5.84%* 	0.69%
CUSTOMER DEPOSITS 	$28,387,477 	1.43% 	2.4 1%* 	0.03%
DEFERRED INCOME
TAXES 	$237,186,904 	11.93% 	0.00%
TOTAL 	$1,988,701,981 	100.00% 	7.08%
* 13-MONTH AVERAGE

ORDER NO . PSC-2024-0168-PAA-GU
DOCKET NO. 20240035-GU
PAGE 7
PEOPLES GAS SYSTEM, INC.
Attachment 2
METHODOLOGY FOR MONTHLY COMPOUNDING AFUDC
RATE
as of December 3 l , 2023
COMMISSION APPROVED
MONTHLY 	CUMULATIVE
AFUDC 	AFUDC 	AFUDC
MONTHS 	BASE 	RATE 	RATE
l 	1.000000 	0.005717 	0.005717
2 	1.005717 	0.005749 	0.011466
3 	1.011466 	0.005782 	0.017249
4 	1.017249 	0.005815 	0.023064
5 	1.023064 	0.005849 	0.0289 l 3
6 	1.028913 	0.005882 	0.034795
7 	1.034795 	0.005916 	0.040710
8 	1.040710 	0.005950 	0.046660
9 	1.046660 	0.005984 	0.052643
10 	1.052643 	0.006018 	0.058661
1 1 	1.058661 	0.006052 	0.064713
12 	1. 064713 	0.006087 	0.070800
Annual Rate (R) = 0.0708
Monthly Rate = ((l +R)"(l/12)) -1 = 0.005717