Just before the Public Service Commission broke for lunch, Commissioner Nathan Skop lobbed a bomb that he said summed up his impression of the $1.3 billion rate request made by Florida Power & Light:
"This rate case seems to be more about bringing cash flow to the operations and discretionary expenditures rather than substance," Skop said.
It was sharp criticism of the company's request to rase base rates by 30 percent, which FPL has said is needed to continue the company's ability to offer low-cost, reliable service.
Skop said that the fact that FPL has already asked the commission to remove from its request several items, including half of its executive compensation package and the cost of company airplanes, illustrates the point. "In large part, the company's request is driven by its requested ROE of 12.5,'' he said. (ROE is a reference to return on equity, the level of profit the company would be allowed to earn. The higher the return on equity, the more customers have to pay in higher base rates.)
After the break, Skop elaborated as he drove the discussion on the profit level. He said that if FPL were given a higher return on equity, "there is no guarantee'' the extra cash from net income would be spent on projects as opposed to being "swept up to the parent,'' FPL Group. "Doling our ROE for the sake of doling out ROE certainly provides internal funds for investment to the company, but there is not guarantee those funds will be reinvested,'' he said.
The PSC staff has recommended the commission set the profit level at 10.75 percent, a level Skop called "a starting point'' but suggested it could go as low as 10 percent.