Florida Supreme Court allows $16 million Recovery

– Summary by Felicia James

On July 7th, 2022, the Supreme Court of Florida held that a Florida utility company was permitted to pass along $16 million in replacement power to customers. The decision reversed the final order of the Florida Public Service Commission (“Commission”). The court only considered Duke Energy Florida LLC’s (“DEF”) challenge to the Commission’s adoption of the
administrative law judge (“ALS”) factual findings of causation. The Commission derived its standard from Fla. Stat. Ann. § 366.06(01), which requires costs be “prudently invested by the utility company.”

DEF acquired an “after-market” steam turbine which they operated beyond its capacity before discovering unusual wear on the turbine’s blades. After replacing the blades several times over the years, DEF decided to take the turbine offline to make modifications to reduce the power output. This resulted in DEF incurring $16 million in replacement power costs. The costs
incurred during the forced outage are at issue in the case.

The ALJ determined that DEF’s imprudent operation of the turbine above its maximum output capacity was the cause of the outage. The commission adopted this conclusion and ruled that DEF could not pass the replacement costs on to customers because its imprudent operation led to the plant’s outage.

The Florida High Court disagreed, holding that the ALJ’s conclusion was “factually contrary to the evidence.” The court found no evidence that the operation of the turbine beyond its capacity was the cause of the turbine’s failure. Therefore, there was no imprudence on the part of DEF. The Florida Supreme Court reversed and remanded with instructions for the
Commission to allow cost recovery.

The suit is Duke Energy Florida LLC v. Gary F. Clark et al., case number SC20-1601.