The Public Service Commission on Thursday agreed to award Florida Power & Light a $358 million base rate request that includes a series of rate increases over four years and rejected a call from the public counsel that the company scale back its rates.
After a morning hearing discussing the nuts and bolts of a proposed settlement, the five-member commission appears on track to vote 4-1 to modify the settlement agreement presented by the company, and allow FPL to received guaranteed profits of between 9.5 to 11.5 percent through 2016.
The settlement is less than the $378 million the company originally sought in its first settlement offer, but the profit level – which would guarantee a midpoint return on equity of 10.5 percent – is higher than the 10 percent the PSC staff recommended in a draft recommendation.
Commissioner Eduardo Balbis, who supported giving the company the 10.5 percent return on equity, expressed interest in demanding that the company also make a concession to collect at least $10 million less from consumers in other areas. No other commissioners would agree.
FPL, a regulated monopoly with 4.6 million customers in Florida, is currently making profits at about 11 percent, the most allowed under current law. But the company’s rate agreement ends in January and it has asked the PSC to allow it to collect more money from customers to pay back the costs of the Cape Canaveral power plant, scheduled to go into service in June.
The company has scheduled two other power plants to go online in 2014 and 2016 and has joined with its largest power users to offer up a settlement that will allow it the flexibility to raise its rates for those plants without PSC oversight, and the expensive and contested rate case that would come with it.
The decision by the PSC to approve much of the settlement effectively shuts down the argument of the Office of Public Counsel, the state agency that represents customers in rate cases. The public counsel has vigorously opposed the settlement deal and instead has argued that the company is making about $253 million more than it should and wants the PSC to lower FPL's rate of return and charge customers less money.
The PSC decision Thursday marks the first time the PSC has moved forward on a rate settlement without the public counsel’s consent.
J.R. Kelly, the state’s chief public counsel, told the Herald/Times that a ruling in favor of the proposed settlement could work against the public in future cases because it would give an incentive for utility companies in the future to do as FPL did and circumvent his office.
FPL side-stepped the public counsel when it entered into its agreement with Florida Industrial Power Users Group, the South Florida Hospital and Healthcare Association and the Federal Executive Agencies and announced the settlement just as the company’s rate case was scheduled to begin in August.
The groups represent about a half of one percent of FPL’s 4.6 million customers but use nearly half of all the electricity generated. Under the deal, they would get lower rates than regular residential customers.
This is also the first major rate case decided by this commission for FPL, the states’s largest utility, since the legislature unseated four members of the previous commission when it rejected most of a $1 billion rate increase request in 2009.
The current commission sided with FPL on the most controversial issues, with Commissioners Art Graham and Lisa Edgar forcefully defending major parts of the settlement.
Balbis, however, prepared a list of issues that he hoped would be considered by commissioners that would modify the settlement and, he said, tilt it more “to the public interest.”
For example, he said he objected to a provision that allows the company to take $400 million out of reserves that was paid for by customers in order to keep its profits lower than 11.5 percent and not trigger a rate case. If the company’s profits exceed that level – or dip below 9.5 percent – it must return for a rate case review.
Balbis suggested the company agree to trimming at least $10 million a year in profits in return for the favorable settlement. But Graham repeatedly objected, saying that those details were intended for a full rate case, not a settlement proceeding and the $10 million was arbitrary.
“They’re still the cheapest animal in the state and I don’t want to see the settlement fall by the wayside,’’ he said.
Balbis bristled and replied: “starting with a detailed list is in the weeds and then picking anything that isn’t on the detailed list is arbitrary.”
He noted how he grew up near FPL’s headquarters, and spent his early career working with them for the city of West Palm Beach, but acknowledged he was being outnumbered by the majority. He added “hopefully the parties will listen to my concerns.”
The PSC is expected to take a vote on the issue later this afternoon.