PSC slapdown of Progress Energy Florida rate request feels good but wait for blowback
Wake up and good morning. Looking at this morning's news that the Florida Public Service Commission slapped down Progress Energy Florida's request for a hefty increase base rates for electricity reminds me of the Star Wars saga in which the naive Rebel Alliance thinks it has given The Empire a good thrashing.
There's a good reason the next movie in the series is called The Empire Strikes Back. And there's good reason to believe Progress Energy Florida -- more to the point, corporate parent Progress Energy in Raleigh, N.C. -- right now is planning a political and economic strategy to retake control of raising the price of electricity. That's the responsible thing for an investor-owned, stock-trading company to do, and Progress Energy's pretty good at what it does.
Keep in mind, then it comes to much of Central Florida getting its electricity in bulk, Progress Energy is it. It is a monopoly in its own service territory.
Here's what happened Monday. The PSC rejected Progress Energy Florida's request for a roughly $500 million annual base rate hike. But it approved a 10.5 percent return on shareholders' investment. That's a bit lower than the 12.5 percent requested by the utility and the 11.25 percent recommended by PSC staffers.
Monday's decision set only the boundaries for the utility's profit. Commissioners are scheduled to vote again on any increases in the rate. Consumer advocates were pleased with the PSC decision but still question the 10.5 percent return amid the wrenching recession, the St. Petersburg Times reported. Times columnist Howard Troxler today wonders if the PSC's new indication of a backbone is a turning point.
The net effect is that base rates will stay flat for the utility’s 1.6 million customers. Progress Energy Florida President Vincent Dolan said the decision will hurt efforts to improve the state's "already aging infrastructure," among other things. As reported in the Sun-Sentinel, Dolan said the PSC's decision may affect Progress' reliability in the long-run. He said it could increase the cost of borrowing money to build plants and slow down the utility's effort to produce more clean energy.
How timely that the intense cold spell in Florida, forcing Progress Energy Florida to beg customers to ease off on electricity use during peak hours, arrived while the PSC decision was made. Here's a Capitol News Service video report on the Tallahassee hearing in which Progress Energy says the quality of its electricity delivery could be compromised in the future without higher rates.
And just how might we see the muscles of the powerful utilities industry flexed in this matter? Well, their options are countless but here's a starter. As reported today in the Miami Herald, amid two PSC votes (the first was Progress Energy's on Monday, the second will be the vote on FPL's rate request tomorrow) over the largest rate cases in state history, the lawyer who represents consumers is on the hot seat. J.R. Kelly (photo, right), the head of the Office of Public Counsel, faces confirmation from a newly formed legislative committeethat had its first meeting on Monday. The Joint Committee on Public Counsel Oversight convened the same day the PSC was voting on the Progress Energy rate case.
Added Progress Energy Florida CEO Dolan, in a statement on Monday's PSC decision: "Depending on the market view of this decision and the changing Florida regulatory environment, we may see an increased cost of capital and a reluctance of investors to put capital at risk in the Florida market. Ultimately, projects from storm hardening to clean-air improvements to carbon-free nuclear might be in jeopardy."
Will we learn the power of The Force?
-- Robert Trigaux, Times Business Columnist