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ORDER NO. PSC -2019 -0218 -PAA -EI DOCKET NO. 20190087 -EI PAGE 2 II. Decision A. Approval of FPL's request to increase its AFUDC rate from 5.97 percent to 6.22 percent FPL requested an increase in its AFUDC rate from 5.97 percent to 6.22 percent. Rule 25- 6.0141(2), F.A.C., Allowance for Funds Used During Construction, states the following: (2) The applicable AFUDC rate shall be determined as follows: (a) The most recent 13 -month average embedded cost of capital, except as noted below, shall be derived using all sources of capital and adjusted using adjustments consistent with those used by the Commission in the utility's last rate case. (b) The cost rates for the components in the capital structure shall 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 shall be based on end of period cost. The annual percentage rate shall be calculated to two decimal places. In support of the requested AFUDC rate of 6.22 percent, FPL provided its calculations and capital structure in Schedules A and B attached to its request. We reviewed the schedules and find that the proposed rate was calculated in accordance with Rule 25-6.0141(2), F.A.C. The requested increase in the AFUDC rate is principally due to an increase in the weighted cost of long-term debt which increased by 17 basis points. The weighted cost of common equity also increased by 6 basis points due to an increase in the equity ratio. FPL used the midpoint return of equity of 10.55 percent, which we previously approved in Order No. PSC-16-0560-AS-EI.2 Upon review, we find FPL's requested increase in the AFUDC rate from 5.97 percent to 6.22 percent is appropriate and consistent with Rule 25-6.0141, F.A.C. Therefore, we approve FPL's requested AFUDC rate increase. B. Approval of the appropriate monthly compounding rate to achieve the requested 6.22 percent annual AFUDC rate FPL requested a monthly compounding rate of 0.504118 percent to achieve an annual AFUDC rate of 6.22 percent. In support of the requested monthly compounding rate of 0.504118 percent, FPL provided its calculations in Schedule C attached to its request. Rule 25-6.0141(3), F.A.C., provides a formula for discounting the annual AFUDC rate to reflect monthly compounding. The rule also requires that the monthly compounding rate be calculated to six decimal places. 2Order No. PSC -16 -0560 -AS -El, issued December 15, 2016, in Docket No. 160021 -El, In re: Petition for rate increase by Florida Power & Light Company. 6 -5