PSC Considering a $1.3 Billion FPL Rate Increase
The largest investor-owned power company in Florida wants too much money from its customers, the state official tasked with representing electric ratepayers said Friday.
Florida Public Counsel J.R. Kelly said Florida Power & Light’s request for a 12 percent return on equity that is currently before the Florida Public Service Commission is too much to bear in a down economy. If the PSC agrees to the proposed $1.3 billion rate increase (Docket No. 080677-EI), FPL, which provides electricity to South Florida and most of the Atlantic Coast, would have a profit margin that is 2 percent higher than the national average, Kelly added.
If the higher rate is approved, it would take affect in January 2010.
“Most businesses are just trying to keep their heads above water,” said Kelly, who argued against the rate increase at a week-long series of public hearings across FPL’s wide service area. “If you told most businesses right now that they could get five percent or six percent, I think they’d do leap frogs. They’re just trying to survive right now.”
Kelly said the average national rate return on equity for public power companies is 10.29 percent, a difference that would save customers millions.
“It’s not like I’m trying to say they shouldn’t make any money,” Kelly said. “We don’t argue that FPL is not a good company. We just think it’s a bad time. It’s too much to put on the backs of ratepayers, who are suffering 10 percent unemployment. If the PSC just gave them the national average, that’s $292 million that would stay in the pockets of customers and (FPL) would still have a healthy return.”
Kelly added that at FPL’s current rate of return of 10.88 percent, the company made $1.1 billion over the past year. He also said that electricity rate increases do not just affect customers’ bills.
“There’s a trickle down effect,” Kelly said. “If the supermarket’s bill goes up or the gas station’s bill goes up, what are they going to do? They’re going to pass it on to their customers. If you pay $1 for a carton of milk now, you’ll be paying $1.50.”
However, FPL spokeswoman Jackie Anderson said the increase was long overdue and that the company’s rates are the lowest in the state. She added that while the request would cause monthly base rates to go up $12.40 per 1,000 kilowatt hours, the increase would be offset by a $17 decrease in fuel recovery fees.
“It’s pretty similar to investing in a new A/C in your home,” Anderson said. “There is an investment that is necessary up front, but you’re going to see a decrease in the long-run, so you’re going to benefit.”
But Public Counsel Kelly said betting on low fuel prices to offset rate increases for electricity was not smart.
“FPL doesn’t have any control over fuel prices,” Kelly said. “They’re hoping they’re going to stay low for the next year, but they don’t know.”
That’s why fuel charges and base rates are separated, he added.
“Fuel is a pass thru expense,” Kelly said. “Whatever FPL pays for fuel, the customers pay for fuel.”
Business is split on the issue. Several large companies are against it – because they are big users of electric power.
Still, Barney Bishop, president of Associated Industries of Florida, one of the state's largest business lobbies, said that the rate increase was long overdue. It has been two decades since FPL rates were raised, Bishop said.
“The last time Florida Power & Light received a base rate increase was more than a quarter century ago,” Bishop said. “The reality is no business can survive without periodic increases in their fees. No legitimate business could have survived in business today by charging 1980s prices.”