Consumer

Advocate Calls FPL Settlement A Bad Deal For Residential Customers

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(Source: CBS)

(Source: CBS)

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TALLAHASSEE (CBSMiami/AP) – A proposed Florida Power & Light Co. rate settlement with a three groups of commercial customers is a bad deal for nearly everyone else, according to the state’s consumer advocate.

Over a four-year period, the proposal would raise base rates for a typical residential customer by nearly $10 per month. Company officials say they expect overall residential bills, though, to increase much less and remain the lowest in the state due to anticipated reductions in fuel charges and other annual adjustments.

Commercial customers, though, are expected to see their overall rates go down or at least remain flat while FPL stockholders also get a higher return.

Public Counsel J.R. Kelly contends the proposed settlement is unfair and inequitable in part because it shifts costs from commercial to residential customers. He said he was participating under protest at a regulatory hearing on the plan that began Monday.

Kelly argued the Public Service Commission cannot legally accept the agreement that FPL signed with groups representing industrial, health care and federal government customers. He added under state law says he’s a “necessary party” to any settlement because he represents all consumers.

“The signatories to the agreement do not and cannot, by virtue of the tiny fraction of FPL’s 4.6 million customers they actually represent, represent the interest of customers other than those described in their petitions to intervene,” Deputy Public Counsel Charles Rehwinkel told the five-member commission.

Last September the panel rejected that argument. Last Friday, the 1st District Court of Appeal refused to block the hearing without explanation. Kelly had asked the Florida Supreme Court to halt the hearing. The justices, instead, sent the case to the appellate court but left the door open for Kelly to make the same argument in a potential appeal if the commission should approve the settlement.

The hearing was scheduled for up to three days. The five-member panel will make its decision on Dec. 13.

Lawyers for FPL and the groups that signed the deal argued it would benefit all customers by ensuring the company can attract capital for new power plants using low-cost natural gas that also burns cleaner than coal.

“This agreement will provide them with four years of competitive and predicable rates,” said FPL general counsel Wade Litchfield.

Jon Moyle, a lawyer for the Florida Industrial Power Users Group, said the deal would be good for businesses by offering rate certainty and keeping their power bills from increasing.

The Florida Retail Federation, Village of Pinecrest and a pair of individual consumers sided with the public counsel, who also argues the deal would give FPL investors a windfall. The settlement calls for a 10.7 percent rate of return, higher than any other electric utility in the state.

“The evidence of record in this docket shows that FPL with no base rate increase at all will be able to provide safe and reliability service in the 2013 test year while recovering all of its reasonable and prudent costs,” said retail federation lawyer Robert Scheffel Wright. He added that FPL still would earn more than $1 billion in net operating income and receive a healthy return on equity without an increase.

FPL originally asked to raise base rates by $690.4 million per year effective in 2013. The proposed settlement would raise base rates by only $378 million next year but provides for additional increases as new power plants come on line in June 2013 and in 2014 and 2016.

The monthly base rate for a residential customer using 1,000 kilowatt hours would go up $4.10 in January and $1.74 in June, for a total of $5.84 if the settlement is approved. It then would increase by about $2 in 2014 and another $2 in 2016. Due to reductions in fuel and other costs, the total bill, though, would increase only 94 cents as of June to $95.56.

Under FPL’s original proposal the base rate for the same customer would increase by $5.23 in January and $1.86 in June, for a $7.09 total in 2013. The net increase, though, would be $2.54 as of June due to the other rate adjustments for an overall bill of $97.16. FPL would have to file new cases if it wanted additional base rate increases after 2013.

(TM and © Copyright 2012 CBS Radio Inc. and its relevant subsidiaries. CBS RADIO and EYE Logo TM and Copyright 2012 CBS Broadcasting Inc. Used under license. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)

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