Florida utility regulators fail to render 'public service' in granting FPL rate hikes

December 20, 2012 

With last week's approval of a contentious settlement agreement between Florida Power & Light and the state's largest commercial power customers, the Public Service Commission is proving to be big business and utility friendly at the expense of residential consumers and other power users. There is scant "public service" on this commission.

The PSC was purged of two consumer-friendly members a few years ago when the Senate refused to confirm former Gov. Charlie Crist's appointments. Subsequently, two other public-oriented commissioners lost their posts in the legislative coup in the wake of the panel's rejection of a massive FPL rate request.

But this latest example of the commission's utility-first approach could backfire. The Office of Public Counsel, which represents consumers in rate cases, strongly opposed the settlement and refused to agree -- stating the deal was not in the public interest and even violated PSC rules. The consumer advocates' office asserts it was excluded from negotiations.

Despite the public counsel's strong objections, the five PSC commissioners held a special meeting and proceeded with the case. The approved agreement gives the utility an extra $350 million a year with a base rate increase beginning Jan. 2. Plus, as new power plants go online, FPL is expected to receive an additional $165 million starting in June; $236 million in 2014, and $217 million in 2016.

J.R. Kelly, head of the Office of Public Counsel, argued FPL's initial increase should have been $316 million, not $350 million, saying the agreement gives the utility more profit than should be permitted.

Kelly has now indicated his office will file a lawsuit and appeal to the Florida Supreme Court to void the agreement. Since the PSC ignored consumers in this case by locking the public counsel out of negotiations, an impartial judicial review is warranted.

The Legislature designated the Office of Public Counsel to represent consumers and provide input on rate increases. This settlement agreement only represents less than 1 percent of the FPL's 4.6 million businesses, homes and other customers.

In October, Kelly filed a petition with the high court over his contention the PSC was violating state law by considering the settlement without input from the public counsel. But the Supreme Court pushed the case down to the First District Court of Appeal, which denied the petition without offering an explanation.

This week, FPL claimed the utility offered to negotiate with Kelly, but the public counsel called that statement "a flat-out lie" in published reports.

Most worrisome is if this precedent stands, residential consumers could be frozen out of future rate cases -- their primary advocate's voice muted and meaningless. This would be the first time the commission has proceeded with a rate agreement without the public advocate's approval. Kelly should proceed with a fresh appeal to the Supreme Court covering the PSC's final approval.

FPL entered into an agreement with the Florida Industrial Power Users Group, the Federal Executive Agencies and the South Florida Hospital and Healthcare Association. The settlement actually lowers or flattens rates for large commercial customers, federal agencies and hospitals and boosts their discounts for reduced power usage during peak demand.

This unfairly shifts the burden to residential and other business customers -- in the amount of $50 million a year, the consumer advocate estimates.

While the base rate increase is lower than the utility's initial request for $378 million, the agreement's guaranteed 10.5 percent profit margin is even higher than what PSC staff recommended -- 10 percent. Commissioners not only ignored the public counsel but its own staff in this case. That will not engender public confidence in the utility regulator.

The fact that FPL is a major campaign contributor to politicians further erodes any such trust in this process.

If this agreement stands, consumers will not pay more until June because lower fuel costs will offset almost all of the base rate increase of $3.76 per 1,000 kilowatt hours a month. Then that month FPL's base rate will rise again, by another $1 as the utility's new Cape Canaveral power plant goes online. As two additional new power plants begin service, FPL will increase rates by an estimated $2 per month in 2014 and another $2 in 2016.

The company maintains lower fuel costs will partially mitigate those increases but should the price of natural gas rise, those costs will be passed along to consumers.

While the increases do not appear to be grossly onerous and the overall consumer bill will still be the lowest in Florida, that's not the point. Not only is the agreement tilted in favor of the largest power users with the financial burden shifting more toward residential customers and others, the PSC appears to have overstepped its authority by bypassing the public counsel.

We encourage Kelly to follow through on a lawsuit. Regulators cannot be allowed to ignore opposing consumer views and should address the public counsel's concerns with convincing arguments.

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