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Panel recommends smaller FPL rate increase

TALLAHASSEE — Florida Power & Light should be allowed to raise its base rate $357 million next year, not the $1.3 billion the company seeks, the staff of the Public Service Commission recommended Wednesday in a report that also says the utility should be forced to cut its executives’ pay.

In the 518-page report, the staff of the agency that regulates utilities disagreed with FPL’s argument that it needs the larger amount to pay for operations and invest in new plants without layoffs. Instead, the staff report said the company should tap $314 million in its own surplus and make dozens of other modifications to its operating budget.

The staff proposal will be one of several factors that the five-member commission will consider when it votes on the rate case, scheduled for Jan. 13. The commission conducted more than two weeks of hearings, heard dozens of witnesses and collected thousands of pages of documents from FPL and consumer advocates and business groups who opposed the rate increase.

Based on that record, the PSC staff also recommended whittling back FPL’s request for how much it may charge customers in advance for storm repairs — from $150 million a year to $50 million. And it recommended that the commission force the company to either reduce its executive salary packages by $33 million, or charge its shareholders, rather than its customers, for the expense.

The staff also identified a handful of FPL expenses it considers out of line: It recommended FPL use shareholder money to pay for $3.7 million in corporate jet expenses and told the company to stop using $45,000 in customer cash to operate a historical museum to preserve company archives and artifacts.

“It would appear that the FPL Museum was designed more for the enhancement of FPL’s corporate image than for mere storage,” the staff recommendation said.

The recommendation, while just one element in the decision, traditionally carries a lot of weight and commissioners rarely give utility companies terms more favorable than those the staff recommends.

FPL, which for the last month has mounted an aggressive media campaign to explain why it deserves the full $1.3 billion rate increase, did not respond to the staff proposal.

“All we ask is that the commissioners evaluate our request on the merits and the facts that were presented, which clearly showed that our proposal will help keep our service reliability high and our bills low over the long term,” said FPL spokesman Mayco Villafana.

If the PSC were to approve the full 30 percent rate increase the company is seeking, the average customer base rate would rise from $42 a month for 1,000 kilowatt hours of electricity to $50.85. In 2010, the company says that $8.85 increase would be offset by a $14 reduction in fuel prices, leaving average customers who use 1,000 kilowatt hours a net decrease of $6 a month.

The staff proposal gives FPL a lower rate increase than it recommended for Progress Energy Florida, the Tampa-based utility that is seeking a $500 million annual increase in its base rates starting next year.

In that recommendation, the PSC staff recommended allowing Progress Energy to raise rates enough to guarantee a profit to Progress Energy’s investors of 11.25 percent. But for the first time, the PSC staff offered FPL a lower profit of 10.75 percent than its sister utility.

In both cases, the staff recommends the utilities be allowed a profit of one percentage point up or down above or below its recommendation.

The votes on the two rate cases will be a crucial test for the revamped PSC. Gov. Charlie Crist appointed two new members in the fall in what he called an effort to give the panel a “fresh face.”

In the past five months, the PSC has been buffeted by allegations that its staff and commissioners have become too close to the utilities they regulate. Crist, who opposes any increase in utility base rates, appointed the new members in October, saying it was time to “clean house.”

In its report Wednesday, the PSC staff also rejected FPL’s request that it be allowed to raise rates in 2011, when it brings new power plants into operation, but suggested the commission consider the option of approving a $310 million rate increase to take effect that year.

The commission will weigh the staff proposal and decide Jan. 13 how much in new revenue to collect from FPL’s 4.5 million customers. On Jan. 29, the PSC will decide how to divide the burden between FPL’s residential and commercial customers.

Regulators must rule by March 18, when the new rates must take effect.

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