Public Service Commission staffers recommended the regulatory agency approve a dramatically lower rate increase for Florida Power & Light on Wednesday – less than one-third of what the utiltiy has proposed.
FPL customers would pay $357 million more in base rates next year under a 518-page recommendation from the PSC staff. FPL is seeking a $1.27 billion annual base rate hike.
The staff recommends significantly cutting FPL's proposed costs for its profit margin, rainy day fund, equipment depreciation and operating costs -- including salaries. The commission plans to vote on the rate proposal Jan. 13 and decide what consumers will pay on Jan. 29.
FPL's proposed rate hike has drawn scrutiny from consumer advocates, legislators and even Gov. Charlie Crist, who opposes it. The company has also gotten heat about its lobbying efforts outside of commission rate hearings, including private communication between some of its employees and regulators.
At the same time, some PSC officials have also been criticized for what some have argued is a too-cozy relationship with the utilities the agency regulates.
Public Counsel J.R. Kelly -- the state's advocate for utility customers – said much of the recommendation would benefit consumers, but said his office still wants to see FPL's rates reduced by $364 million.
"We didn't get what we asked but $300-something million – heck that's a lot better than a $1 billion dollar increase. That's something to be thankful for," Kelly said. "There are some things we're very happy about but it's still going to come down to what the commissioners think and what they do."
FPL spokesman Mayco Villafana said the company needs the full increase to make its electric grid "stronger, smarter, cleaner and even more fuel efficient -- and that will help keep bills low in the future."
"All we ask is that the commissioners evaluate our request on the merits and the facts that were presented, which clearly showed that our proposal will help keep our service reliability high," he said.
Neither the commission nor FPL provided an estimate of how customers' rates would be impacted under the recommendations. Under FPL's proposal, a typical customer would see an $8.85 increase in base rates but the total bill would drop by about $6 a month due to lower fuel costs, according to FPL.
Some key costs the staff recommends cutting from FPL's proposed rates include:
Shareholder profit: Staffers urged a 10.75 percent profit on shareholders' investment for FPL – lower than the 11.25 percent they recently recommended for Progress Energy Florida and the commission approved earlier this year for Tampa Electric Co. FPL officials said they need 12.5 percent to allow the company to secure lower financing rates for projects, which saves customers money.
Equipment depreciation: Staffers recommend reducing the cost of paying for power plants and other equipment by a total of $240 million a year. That would in part return to customers over four years most of the $1.25 billion the consumer advocates say FPL did not need in these so-called depreciation costs. FPL proposes returning the $1.25 billion over about 20 years.
Salaries: Staffers urged cutting FPL's proposed operating and maintenance costs by more than $100 million, including more than $40 million for salary-related costs. The company recently agreed to remove $37 million in executive pay costs from its rate request.
Storm reserve: The recommendation would cut the annual amount customers would pay to build up a rainy day fund from about $150 million a year – as FPL proposes – to $50 million. But FPL would still be able to acculate the $650 million it wants for that fund over time.
Automatic power plant approval: Staffers recommend barring FPL from passing to customers – with less regulatory scrutiny – the additional $182 million cost per year over base rates for a new natural gas generator in Palm Beach County. FPL officials have said only the final costs from the plant would be built into rates and the new plants would actually save customers money in the long-run because they're more fuel-efficient.
Julie Patel can be reached at 954-356-4667 and firstname.lastname@example.org.Copyright © 2015, The Baltimore Sun