PSC rejects Progress Energy rate increase, keeps bills static
Progress Energy's electric customers will not be paying higher electric fees this year, but they won't be seeing their bills drop either, according to a decision rendered late Monday by the Florida Public Service Commission.
The commission voted unanimously to give the St. Petersburg-based company no new revenues, rejecting Progress' request for a $500 million annual increase. It said the company can keep the $132 million base rate increase regulators approved in July, which the company sought to pay for construction of its new nuclear power plant in Bartow.Progress Energy President Vincent Dolan said the decision could have long-term implications by leading to a "more expensive, less-reliable system for Florida customers."
“We know that there is never a good time to raise rates, but the PSC decision is particularly harmful because it fails to recognize the true costs associated with providing a secure, reliable electricity system," Dolan said in a statement.
The decision gives Progress a 10.5 percent profit level -- down from the 12.54 percent the company had requested. The PSC decision rejected $10 million in executive compensation, said the company should rely on 50.3 percent of its cash flow from borrowed money, and ordered the company to return $5.8 million a year over the next four years that it over collected from customers to pay off its power plants.
"It's fair to the company, helps them preserve their integrity, and it's inherently fair to ratepayers," said Commissioner Nathan Skop.
The 10-month long rate case was delayed at the request of Gov. Charlie Crist, who appointed two new commissioners to the panel because he said he wanted to bring in "new blood." The commission has been shaken by revelations that some of its staff and commissioners were too close to the companies they regulate.
The PSC, with two new commissioners -- David Klement and Benjamin "Steve'' Stevens -- and a new chairwoman, Nancy Argenziano, voted unanimously for a series of rulings on the power company's request.
The rate case request was opposed by the Office of Public Counsel, the office that represents consumers in utility cases, the attorney general, the Florida Retail Federation, and the Florida Industrial Power Users Group which represents large companies.
The commission not only agreed with those groups that the company did not deserve a rate increase, it rejected the PSC staff recommendation that the company be allowed a smaller $58 million increase and the recommendation that Progress profits be set at 11.25 percent.
"We are thrilled that the commissioners saw that the staff recommendation was too high," said J.R. Kelly, the public advicate who represents consumers. But he wishes the PSC had also rejected the $132 million awarded in July. "We're disappointed that anything was awarded but it's more favorable to ratepayers than unfavorable."
A year ago, the PSC not only approve a rate increase request for Tampa Electric Company, it exceeded the staff recommendation by granting a 11.25 profit level, higher than the 10.75 percent recommended by the PSC staff.
The commission said Monday that if Progress needs new revenue in the future, it must come back and file another rate case.
Commissioner Lisa Edgar said that having another rate case "would not be the worst of all possibilities'' and Skop agreed that, "given the economic conditions, that's probably not a bad thing."
Commissioners said they tried to arrive at a balance between the needs of the company, and the needs of customers struggling to pay electric bills in the midst of the recession. The ruling was seen as a bellwether for the largest and more contentious rate increase request by Florida Power & Light, which is seeking a $1.3 billion rate increase. That vote will take place on Wednesday.