Here's a Business 101 problem so simple, everyone should get it right.
There are three big stores.
They all sell the same item.
Store One raises its price by 48 percent over the past 10 years.
By the start of 2014, Store One's price will be much higher than Store Two or Store Three.
Which store to avoid?
You know the answer. I know the answer.
But state regulators of our electric utilities don't get it.
Turns out that Store One is Duke Energy Florida, which provides electricity to west-central Florida. In 2003, the company charged its customers $83.71 for 1,000 kilowatt hours of power, about what the average residential customer uses a month. By 2014, that rate rises to $124.30. That is a 48 percent increase.
Stores Two and Three are Tampa Electric and Florida Power & Light. Both charged more for electricity in 2003 than Duke. But their rates rose more slowly since then. Duke's electric rates passed each of them long ago.
The sad truth is Duke Energy Florida customers cannot switch to the cheaper Tampa Electric ($109.57 by 2014) or Florida Power & Light ($100.26 by 2014).
All three electric utilities are monopolies. Each has its own service territory in Florida to supply power to homes and businesses. The monopoly was given to these utilities with the expectation that each would run its business efficiently. And state regulators would police any provider that did not do its job well and keep its price relatively close to other similar providers.
Somewhere along the way, things went terribly wrong.
Duke Energy, which last year bought Progress Energy Florida, has done a lousy job over the past decade running its power plants. This is the company that permanently closed the Crystal River 3 nuclear power plant after what should have been a routine maintenance upgrade.
This is the same company that said it would build a nuclear power plant in Levy County. It charged customers in advance to help start Levy, only to shelve the price-gone-wild project years later.
Customers were charged billions. No electricity was generated.
How did this mess happen? Where were the watchdogs? Why can't Duke Energy Florida be held accountable for squandering ratepayer money and jacking up rates?
Floridians should have answers to these questions. It's a terrible precedent in Florida that they probably won't get them, despite a weekend protest by customers outside Duke's headquarters in downtown St. Petersburg.
On Wednesday, the Florida Public Service Commission — a puppet of the utilities it is supposed to regulate — will meet and probably rubber-stamp a proposed settlement.
If the PSC accepts this settlement, Duke will not have to defend its wasting nearly $3 billion forced upon customers to pay in return for delivering zero electricity. Nor will it have to justify why it should get to keep $250 million it made on its two defunct nuclear projects.
Nor is this the end. Higher rates await in the years ahead.
If Duke really was Store One in a free market, its customers would flee elsewhere.
Instead, they must stay and suffer. The business gods must be crazy.
Contact Robert Trigaux at [email protected]