Opinion ID: 1846151
Heading Depth: 1
Heading Rank: 7

Heading: Capital Costs

Text: GTC also sought recovery of intrastate capital costs in the amount of $141,552, contending that the words used in the statute and the fact that GTC is a price-capped entity demonstrate legislative intent to allow full recovery of all actual capital costs of replacing any lines, plants, or facilities damaged by the storm. Mr. Ellmer confirmed that the petition for recovery of storm costs included claims for capitalized material, capitalized building repairs, capital asset costs, and equipment. These capital costs included capital assets that were replaced or added during repairs necessitated by storm damage. Included within the capital equipment costs was $80,405 for a new Alligator Point CXR System, which is a carrier system to provide new voice and data service over fiber optic lines at Alligator Point. The PSC found it unreasonable for GTC to recover from consumers, in one year, the full cost of capital assets that it would normally depreciate over fifteen years, and that replace assets that have been, for the most part, fully depreciated. Specifically, the PSC reasoned: We question whether it is reasonable to allow the entire capital asset cost to be recovered over a one-year period. GT Com has acknowledged that the economic lives of these assets are greater than one year as it has established a 15-year depreciable life for the capitalized assets addressed in this case. With the exception of 726 feet of cable, all assets that were replaced by GT Com as a result of Hurricane Dennis, were fully depreciated. Allowing recovery of the replacement plant in a one-year period, when GT Com's current depreciation policy is to use a fifteen year life, is not reasonable. Businesses operating in a competitive environment do not recoup capital asset costs in a single yearthe costs are included in the balance sheet with the goal of earning a return on the assets over time. Section 364.051(4)(b)(1), Florida Statutes, allows a company to file a petition to recover its intrastate costs and expenses relating to repairing, restoring, or replacing the lines, plants, or facilities damaged by a named tropical system. The statute, however, does not provide a definition of the term costs. Costs can logically mean the dollars expended to repair, restore, or replace; or, costs can be defined as the incremental increase in total costs. Many other definitions exist for the term costs. We have consistently applied the principle that when an asset exceeds a minimum threshold level and has a long term life, that asset should be capitalized. With respect to petitions for storm cost recovery, we have consistently applied this capitalization methodology. [5] Capitalization of assets is not limited to regulated utilitiesit is used by most businesses. The PSC's treatment of capital costs is based on its interpretation of the reasonableness requirement of section 364.051(4)(b). Although section 364.051(4)(b) neither provides a definition of storm costs nor expressly discusses adjustments for normal capital costs, as does section 366.8260(1)(n) for electric utilities, section 364.051(4)(b) does expressly require that the company show and the PSC find that the costs to be recovered for replacing lines, plants, or facilities are reasonable under the circumstances of the storm. The PSC's determination in regard to capital costs, based on its construction of this statute, is not clearly erroneous and will not be disturbed. While we are not prepared to state that in all circumstances recovery of 100% of capital expenditures made in one year because of a storm should be disallowed, in this case GTC has not carried its burden of demonstrating error in the PSC's order disallowing recovery of its capital costs related to Hurricane Dennis.