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Progress Energy Takes Turn Before the PSC

Under a glaring spotlight sparked by a myriad of conflict-of-interest charges which marred its last set of hearings, the Florida Public Service Commission on Monday powered into deliberations on higher rates from the state’s second largest power company.

The PSC’s recent consideration of a $1.3 billion rate increase proposal from Florida Power & Light was obscured by accusations of improper communication between staffers and company employees and questions about the travel habits of FPL executives. But the panel nonetheless moved forward with the next item on its lengthy fall agenda: a separate $500 million increase requested by Progress Energy.

Progress, which has more than 1.6 million customers in 35 Florida counties, began Monday trying to convince the PSC to approve the remainder of a $13.83 per 1,000 kilowatt hours rate hike beginning in January that the panel temporarily approved in July. Then, the PSC authorized the company to charge customers an extra $4.52 immediately, with the caveat that it would have to be reimbursed if the plan were not ultimately approved in this proceeding (Docket No. 090079-EI).

Progress, which last had a base rate increase in 1993, argued during opening statements Monday that it needed the new revenue to maintain service and continue to build and operate infrastructure like an existing power plant in Polk County and a proposed new nuclear plant in Levy County.

“We are here today because Progress Energy Florida has real and substantial capital investments and real and significant decreases in sales,” attorney Alexander Glenn told the PSC. “We also have real … needs to run our business the way you and our customers expect it will be run. Progress is also embarking on one of the largest capital expenditure programs in the company’s history, which includes the licensing and construction of its Levy nuclear project.

“These investments are key to secure the state’s energy future and to implementing the energy polices set forth by the governor, the Legislature, the Cabinet and this commission,” Glenn continued.

Glenn also argued that Progress Energy has made smart financial decisions with the money it already has.

“We’re a good company, we’re a well-run company,” he said. “I don’t think you’re going to hear any interveners say that we’re not. As you’ll hear from our witnesses…we run our power plants efficiently, our nuclear power plant is one of the best-performing … over the last decade and our storm response is really second-to-none.”

The usual cadre of consumer groups ceded Glenn’s point that Progress Energy is well-operated, but they still stood opposed to the rate increase request Monday, as they did earlier this month against FPL’s proposal. Charles Rehwinkel, of the Office of Public Counsel, which represents customers’ interests before the PSC, said Floridians could not bear to give Progress Energy $500 million more.

“This is case about bad timing,” Rehwinkel said in his opening statement. “It’d be easy for me to sit here and say the standard things about the company: that the company is greedy. I’m not going to say that. Progress Energy has come in here and asked you for $500 million at a time when state is suffering immensely. You’ve heard that a million times…. But it is what it is. The problem with this filing is there is not enough sharing of the pain that’s going on in the state right now.”

OPC was joined in opposition to the rate increase by organizations such as the Florida Retail Federation, the Attorney General’s office and the Florida Industrial Power Users' Group and White Springs Agricultural Chemicals, one Progress’ largest individual users. The groups tried unsuccessfully Monday to persuade the PSC not to begin deliberations on the plan until February 2010 because it is $93 million higher than the original request.

With the PSC proceeding anyway, the Retail Federation, represented by lawyer Robert Scheffel Wright, argued that Progress should not only be denied a rate increase, but said the company should be lowering its current rates because its proposal was largely based on a nuclear plant that has not yet been fully approved.

“Commissioners, there are many issues in this case, but at bottom the decision you are called to make is whether Progress Energy Florida needs any rate increases at all in order to provide adequate and reliable service at the lowest possible cost,” Wright said. “The evidence will show they do not.”

Jon Moyle, a lawyer for the Florida Industrial Power Users Group, also echoed the concerns raised by the OPC and the Retail Federation in his organization’s opening statement. Moyle said the PSC should err on the side of returning money to the customers in the tough economic climate in the state and argued that the nuclear plants should not be a determining factor in the rate hearings.

“Don’t let (the Levy nuclear plant) capture you in terms of making decisions,” Moyle said. “You will hear Progress say ‘Levy,’ but we haven’t decided whether to move forward with it. We’re taking steps in that direction, but it’s not a done deal. Surely, you should not make rate case decision about something that is uncertain as to whether its going to take place at all.”

Aware of such criticism from opponents, particularly the knock about the current economy, Progress sought to pre-empt the insensitivity charges in their statement, arguing that the economy was hurting the company too. Attorney Glenn said the company laid off 150 employees last year and eliminated another 150 open positions to tighten its own belt before coming to the PSC to ask for more money.

“We would not be here today if did not absolutely have to be,” Glenn told the PSC. “We reduced our workforce by 7-and-a-half percent. We have been and are a fiscally sound company. We’re mindful of the impact of any rate increase on customers, so why are we here? It’s pretty simple and I think not in dispute: we have identifiable costs and less sales.”

Glenn also framed the competing arguments presented Monday at the PSC as a choice between expertise and opinions.

“You’ll hear from our witnesses, who actually run power plants, who actually build things, who actually maintain our electric grid, who actually develop budgets and are held accountable to them,” he said. “In contrast, what are you going to hear from the interveners? An accountant. You be the judge of who’s more credible about what our companies need to run its business.”

Similar to the FPL hearings that proceeded it, the PSC’s Progress Energy case is taking place against a backdrop of conflict-of-interest questions that sprung from allegations that the commission was too close to the companies it regulates. Progress was not linked to the questions, which mounted as three PSC commissioners fired or placed on administrative leave aides after newspaper reports that they had given their BlackBerry messaging information to an FPL attorney, which could allow the company official to text message the staffer during meetings without creating a public record.

In addition to the Progress Energy and FPL base rate cases, the PSC is scheduled to determine this fall whether or not the costs of new nuclear power plants planned by the companies at Turkey Point and in Levy County respectively should be passed on to their customers. FPL wants to add 67 cents a month per 1,000 kilowatt hours to generate $62.7 million and Progress Energy proposes adding $2.38 per 1,000 kilowatt hours to bring in $236.4 million. The commission will also consider a $1.6 billion proposed FPL underground natural gas pipeline.

The PSC has four more days of evidentiary hearings for Progress Energy’s request scheduled this week and the panel added three more days of FPL hearings, Oct. 21-23.

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