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ORDER NO. PSC -2017 -0283 -TRF -El DOCKET NO. 20170069 -El • PAGE 4 Updated Operational Costs Rule 25-6.078(4), F.A.C., requires that the differences in net present value (NPV) of operational costs between overhead and underground systems, including average historical storm restoration costs over the life of the facilities, be included in the URD charge. The inclusion of the operational cost is intended to capture longer term costs and benefits of undergrounding. Operational costs include operations and maintenance costs and capital costs and represent the cost differential between maintaining and operating an underground versus an overhead system over the life of the facilities. The inclusion of the storm restoration cost in the URD differential lowers the differential, since an underground distribution system generally incurs less damage than an overhead system as a result of a storm, and therefore, less restoration costs when compared to an overhead system. Duke's operational costs, last updated for the 2014 filing, represent a five-year average (2012 — 2016). The methodology used by Duke in this filing for calculating the NPV of operational costs was approved in Order No. PSC -12 -0348 -TRF -E1.4 Duke's NPV calculation used a 34 -year life of the facilities and a 6.80 percent discount rate. We note that operational costs may vary among IOUs as a result of differences in size of service territory, miles of coastline, regions subject to extreme winds, age of the distribution system, or construction standards. Table 3 below compares the 2014 and 2017 NPV calculations of operational and storm • restoration cost differentials between overhead and underground systems on a per lot basis. As Table 3 shows, there are minor differences in the differentials from 2014 to 2017. Table 3 NPV of Operational Costs Differential ner Lot Source: 2014 and 2017 Petitions " Order No. PSC -12 -0348 -TRF -El, issued July 5, 2012, in Docket No. 110293-E1, In re: Petition for approval of • revised underground residential distribution tariffs. by Progress Energy Florida. Inc 2014 Calculation 2017 Calculation Difference Low Density Underground NPV - Operational Costs $1,022 $1,189 $167 Overhead NPV - Operational Costs $741 $903 $162 Per lot Differential $282 $286 $4 High Density Underground NPV - Operational Costs $520 $605 $85 Overhead NPV - Op erational Costs $424 $517 $93 Per lot Differential $96 $87 ($9) Ganged Meter Underground NPV - Operational Costs $400 $466 $66 Overhead NPV - Operational Costs $315 $385 $70 Per lot Differential $85 $81 ($4 Source: 2014 and 2017 Petitions " Order No. PSC -12 -0348 -TRF -El, issued July 5, 2012, in Docket No. 110293-E1, In re: Petition for approval of • revised underground residential distribution tariffs. by Progress Energy Florida. Inc