PSC Hears Opening Arguments From FPL, Consumer Groups
After a recess brought on by a possible conflict-of-interest scuttled away the morning, the Florida Public Service Commission got on track Monday afternoon, hearing opening arguments from the state’s largest publicly-regulated utility about its proposed $1.3 billion rate increase and taking statements from a bevy of consumer advocacy groups who hope to stop it.
Speaking first, Florida Power & Light, which provides electricity to South Florida and most of the Atlantic Coast, sought to counter pre-hearing claims from consumer advocates who had intervened against their proposal (Docket No. 080677-EI). FPL lawyer Bryan Anderson said opponents of the proposed increase ignored how favorably FPL’s existing rates compared with other electric providers around the state and how well its performance had been graded.
“Those who oppose any type of increase want you to completely ignore these two facts and the clear, associated customer benefits, even though most customers, if asked, would probably tell us that the two most important aspects of electric service are price and service, two areas in which FPL is a top performer,” Anderson told the PSC.
Anderson added that opponents also ignored the fact that FPL’s fuel recovery projections are forecasted to be down, which if the pattern holds, would decrease overall electric bills even if the base rate is increased. He said FPL saved customers $3 billion in 2002 by improving efficiency in its power plants.
Also, weeks after telling the PSC that its costs for fuel this year are about 6 percent lower than originally estimated, FPL said last week that it expects to spend even less on fuel next year. Coupled with a report the company filed earlier this month, the bill for 1,000 kilowatts of electricity could decrease by $9 next year, even if its $1.3 billion base rate increase is approved.
But Anderson said opponents of the proposed base rate increase were not considering any of that.
“Instead, they will tell you that you must focus only on the base rate in this proceeding, and that it is just good luck that fuel prices have come down,” he said. “Yes, it is fortunate that fuel prices have dropped. But there is much more to the story than just lower fuel prices.”
Anderson told the PSC that although the opponents would take issue with a number of specific technical points in the company’s request, their objection really boiled down to dollars and cents.
“Simply put, they want somebody other than their clients or constituents to pay for any increases in the base rate component of the cost of providing electric service – even though the base rates that they pay today are essentially the same or less than they were 25 years ago,” he said.
But when it was their turn to make opening statements, consumer and business groups like the Office of Public Counsel, the Attorney General’s office, Associated Industries of Florida, the Florida Retail Federation and the South Florida Hospital and Healthcare Association painted a different picture. They all said now was not the time for FPL to be asking customers for an extra $1.3 billion and one group – hospitals – said the company’s emphasis on lower fuel costs was simply “a smoke screen.”
Public Counsel lawyer Joe McLaughlin ticked of a list of what he said were incorrect FPL projections, including cost of capital, depreciation, storm damage accruals and employee compensation. He told the PSC that FPL should actually be reducing its base rate by $354.9 million annually.
“If you peel away these and other excesses, you will recognize this to be an over-earnings case,” McLaughlin said.
Florida Public Counsel J.R. Kelly told the News Service last month that the rate increase request would give FPL a 12 percent return on equity, which he said would give the company a profit margin that is 2 percent higher than the national average. McLaughlin echoed the sentiment Monday.
“FPL’s (equity ratio) must be taken into account when the commission determines its appropriate return on equity,” he said. “FPL can’t have it both ways. FPL cannot deploy a very high equity ratio, which lowers its financial risk, and at the same time, expect an authorized return on equity that doesn’t correspond with that lower risk.”
FPL argued in its own testimony that its proposed return on equity was lower than large retailers like Publix and Wal-Mart. But Florida Retail Federation lawyer Robert Scheffel Wright said the economy that companies like those are now operating in made the proposed increase untenable for business.
“FPL’s rate increase will, if granted, produce rates that are demonstrably unfair, unjust, unreasonable and contrary to the public interest,” Wright said. “If FPL were truly concerned about the bleak state of the economy, it would be tightening its own belt and letting already strapped Floridians - whose belts are already pitched to the last hole - hang onto $1.3 billion that FPL is trying to get from them, with your approval.”
Senior Assistant Attorney General Cecilia Bradley focused on the effect of the proposed rate increase on senior citizens, saying the community that arguably needs electric service the most would be most unable to keep up with higher base rates. Bradley said the attorney general’s office heard stories during hearings it held on the increase about seniors rationing food and medicine to be able to afford their electric bills at the existing base rates.
“We support strong, reliable utilities and we’re not here to argue against that or say that they are not entitled to be profitable,” she said. “What we are saying is that today, in this economy, it’s not reasonable (to have) this type of rate increase. People can’t afford it. It’s not that it’s inconvenient or they don’t want it, they can’t afford it.”
The PSC’s hearing about the proposed FPL case is expected to continue through Sept. 4 and final rulings are expected in November. The new rates would take effect in January 2010.
The PSC is also set to consider a similar request from Progress Energy Florida next month.