Dive Brief:
- Duke Energy Florida doesn’t want to set a new rate specific to large load customers yet, arguing that the provisions of its proposed large load tariff are sufficient to protect other ratepayers from unfairly shouldering a data center cost burden, the utility argued to the Florida Public Service Commission in a Tuesday hearing.
- Walt Trierweiler, Florida’s public counsel, argued that Duke Energy’s proposal does not do enough to satisfy Florida’s SB 484 law signed in May, which requires public utilities “to provide certain minimum tariff and service requirements for large load customers.”
- The proposal “doesn't attempt to comply with the most basic provisions of SB 484 because Duke claims it doesn't have to, because they can't raise rates in the immediate future because of a settlement agreement,” Trierweiler said. “[Office of Public Counsel] points out that there is no settlement agreement, exclusion, or exemption from the statutory requirements.”
Dive Insight:
DEF is the first investor-owned utility to submit its SB 484 compliance proposal to the Florida PSC. Its proposal has provisions for large load customers including a 20-year minimum term of service, and changes to its Contribution in Aid of Construction tariff, “such that large load applicants will be required to advance the total estimated costs to extend service.”
Bradley Marshall, an Earthjustice senior attorney representing Florida Rising at the hearing, argued that if there is a data center bubble which then bursts, “the general body of customers will be left holding the bag for billions and billions of dollars of infrastructure in the form of generation and transmission that it does not need.”
“This is a case of first impression, and the Commission must get this right,” Marshall said. “We already have an affordability crisis in this state, and now we have a new law that quite sensibly requires that data centers pay their full cost of service. Duke's proposal doesn't come close and must be rejected.”
John Moyle, an attorney representing the Florida Industrial Power Users Group, argued the opposite, saying the state doesn’t “want to get caught up in a rush to do something about data centers and have harm inadvertently inflicted upon these large load customers.”
Dianne Triplett, an attorney for Duke, argued that “no party has identified a mechanism by which approval of this tariff could increase any customer rates before the end of 2027, which is DEF’s settlement term.”
“Here's why: one, base rates are frozen during the settlement period,” Triplett said. “Two, we are unlikely to incur significant large load costs during the settlement period. And three, even if we do incur such cost, shareholders bear them during the settlement period.”
Major Ryan Thompson, an attorney in the Office of General Counsel at the Florida PSC, noted during his questioning of Matthew Chatelain, pricing and regulatory solutions manager at Duke Energy Corp., that DEF’s 2024 settlement agreement contains a clause which allows DEF to “modify or change its base rates in light of a government imposition.”
Chatelain said he was aware of the clause but was not sure “what, necessarily, would cause that exception to kick in.”
The clause states that DEF can’t seek to recover “costs of any type or category that have historically and traditionally been recovered in base rates,” except in the case of three exceptional scenarios, one of which is when the costs are “the direct and unavoidable result of new governmental impositions or requirements.”
Thompson paraphrased this clause to Chatelain and asked if it would surprise him if that provision existed; Chatelain said it would not surprise him.
Thompson later asked Steve Wishart, an assistant vice president at Concentric Energy Advisors who appeared as a DEF witness, about his direct testimony in which he said utilities are in active competition to attract large load users, but Florida is “not currently a top-tier market for data centers.”
“Would using average embedded rates make Florida more attractive or less attractive for data centers?” Thompson asked, referring to a rate scheme which doesn’t place certain customers in a different rate class, as compared to an incremental cost tariff, which does. “Would it be fair to say that data centers are attracted to average embedded rates?”
Wishart confirmed that he believes this structure is attractive to data centers “because of the perception of fairness,” though he also testified that an average embedded rate structure “definitely” costs data centers more in the long run due to asset depreciation.
