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Regulators cap Progress Energy revenue, ensuring only small rate increase

Progress Energy customers won't see any significant differences in the amount they pay on their utility bills — at least over the next year.

Lower fuel costs and a decision by the state Public Service Commission on Monday will help keep the total cost of customers' energy usage about the same as a year ago.

But if fuel costs increase, as is expected over the next year, customers could see substantially higher bills in 2011.

Commissioners voted Monday to limit Progress Energy's return to 10.5 percent, which is about 2 percentage points lower than the utility had sought.

Progress' request would have meant the company could have generated as much as $499 million in additional revenue, but the utility now could realize a more modest amount of less than $141 million.

The commission returns Jan. 28 to set the energy rate Progress can charge, though the more modest revenue return laid out on Monday means any increase will be small. A small increase will be offset by the lower fuel costs, keeping consumers bills about the same.

Consumer advocates had called for a decrease in energy costs to consumers. They say the PSC decision gives the utility enormous financial returns at a time when the economy remains sour and hurts consumers in the long run.

"These guys can get 10.5 percent guaranteed, no risk. Man. How do you justify that?" asked Bill Newton, executive director of the Florida Consumer Action Network. "That is basically doing nothing for consumers."

Commissioners grappled through the morning and early afternoon with a result they hoped would produce a "win-win" for consumers and the utility.

"The consumers are interested in not having a rate increase," said Commissioner Nathan A. Skop.

But the consumer concern stood in contrast with another reality: "The lower the reward in this case, the sooner the company is going to come back, again," said Andrew Maurey, a member of the commission's staff.

The PSC staff recommended Progress receive a revenue increase of $180 million, which was reduced by commissioners. J.R. Kelly, the state public counsel, said he was glad commissioners at least acted to save customers some money.

"We are certainly thrilled," he said.

Progress Energy Florida serves more than 1.6 million customers in Central and North Florida.

Monday's decision set only the boundaries for the utility's profit. Commissioners are scheduled to vote again on any increases in the rate.

The energy fee on consumers' bills is made up largely of the so-called base rate. The base rate is money utilities charge consumers for the cost of delivering electricity. That money is used for such costs as maintenance of plants, power lines and poles as well as employees salaries.

Utility bills also include a fuel charge that does not benefit the utility companies but rather is a direct cost they pay for the fuel needed to produce electricity. That cost fluctuates based on the market.

Newton, of the consumer action network, said there remains one step consumers still can take to lower their energy costs.

"Use as little energy as you can," he said.

Ivan Penn can be reached at ipenn@sptimes.com or (727) 892-2332. Follow him on Twitter at www.twitter.com/Consumers_Edge and become a fan of Consumer's Edge on Facebook.

Regulators cap Progress Energy revenue, ensuring only small rate increase 01/11/10 [Last modified: Monday, January 11, 2010 11:15pm]
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