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Upcoming PSC hearing on Progress Energy's $2.5 billion repair bill is unprecedented

Editor's note: Correction notice appended below.

Over the next six months, five people will hear and weigh a decision that will determine how much of a $2.5 billion repair bill Progress Energy Florida's customers will have to pay.

The case regarding the crippled Crystal River nuclear plant has no precedent.

Never before in U.S. history has a utility broken the reactor containment building while replacing old steam generators at a nuclear plant. Never before has a state had to determine whether a utility acted appropriately in its handling of similar projects. And that's because never before has a utility managed a steam generator replacement on its own.

What the five members of the state Public Service Commission decide will determine how much of an increase or decrease Progress' 1.6 million Florida customers will see in their bills come January 2013 and in the years following.

Critics of the commission say they fear its current members all too often favor utilities over customers. They say the commissioners follow the will of the Legislature, which receives millions of dollars in contributions from Progress Energy and its executives.

Among the lead critics is a member of the Legislature, state Sen. Mike Fasano, R-New Port Richey.

"I saw when Gov. Crist's appointees were not confirmed because they didn't approve a billion-dollar increase for the utilities," Fasano said. "Right now, I feel the Public Service Commission is not as sympathetic or concerned about the consumers."

The commissioners and the PSC staff bristle at the notion that they show partiality to any side. They said they carefully consider the facts and what is in the best interest of the customers before making a decision and will do the same as they review the Crystal River nuclear plant case.

"They're going to be gathering a full evidentiary record," said Cindy Muir, a spokeswoman for the commission, speaking on behalf of the commissioners. "Our commissioners are dedicated to carrying out . . . our mission."

Art Graham, PSC chairman, said in a meeting with the St. Petersburg Times editorial board in August that "there's a narrative" about previous PSC rulings and actions that leads the public to believe the agency is pro-industry. Graham said while there may have been questionable issues in the past, it is unfair to continue holding current members responsible for them.

• • •

The powerful Public Service Commission regulates private water, sewer and electric companies.

The five-member panel acts much like a judicial body. The state Office of Public Counsel presents arguments to the group on behalf of consumers while utilities argue their cases for rate adjustments and proposals for services.

One of the panel's most recent, controversial decisions was the awarding of a $140 million rate hike to Progress Energy in November to cover costs related to the outage at the Crystal River nuclear plant.

The Citrus County nuclear reactor went offline in fall 2009 for the steam generator project. During the project, workers cracked the 42-inch thick concrete nuclear reactor containment building.

Progress' attempt to fix the crack resulted in two more cracks.

The PSC will hear and decide next year whether Progress acted appropriately during the steam generator project and whether customers should pay for any of the expenses related to the outage.

While the plant has been offline, Progress has had to buy alternative electricity. Last month, the PSC voted unanimously to pass $140 million of those costs on to customers beginning Jan. 1, ahead of hearings next June and despite questions about whether Progress' actions were appropriate.

When it voted to include the charges in customers' bills next year, the commission said Progress simply could refund the money if the PSC determines the handling of the steam generator project was inappropriate or not "prudent."

The commission has approved payments and ordered the money refunded to customers before, Muir said. "It's not unheard of."

But this case — one of the most costly nuclear incidents in U.S. history — is different, Fasano says. At a time when consumers are struggling with their finances, the commission sided with a utility that may not have handled the project in a "prudent" manner.

"I was outraged, outraged the PSC granted them the increase before hearing all the facts," Fasano said. "It's people today who are struggling. The last thing they need is a rate increase.''

In all, Progress wants customers to pay at least $670 million of the $2.5 billion in costs related to the repair of the broken nuclear plant.

"It concerns me that the Public Service Commission is not as friendly to the consumer as they have been in the past," Fasano said.

• • •

The last time the PSC took a position staunchly opposed to major utility rate hikes, the Legislature replaced the members of the commission who sided with the customers.

Among those replaced was Nancy Argenziano, a former PSC chairwoman. Former Gov. Charlie Crist had picked Argenziano and another one-term commissioner, Nathan Skop, because of their strong proconsumer bent.

At issue for Progress Energy was a request for a $500 million rate increase. The request came at the same time the Crystal River nuclear plant first cracked.

Argenziano and Skop led the vote in January 2010 against the record rate increases sought by Progress and Florida Power & Light. The stand antagonized the utility industry.

What followed that January vote was a record amount of campaign and political contributions to the Legislature and the Republican Party by Progress Energy.

Progress gave more than $867,000 in 2010 — the year the Legislature replaced Argenziano, Skop and two other commissioners with the current board members.

And in 2011, Progress gave the third-highest amount it has contributed to Florida politics with more than $420,000 in donations. The utility's contributions over the past four years have exceeded $2.3 million.

Despite the donations, Progress says it is a regulated utility subject to the laws of the state.

"As a regulated utility, Progress Energy Florida operates under the direction of the Florida Public Service Commission," said Tim Leljedal, a Progress spokesman, in response to inquiries about the situation.

Senate President Mike Haridopolos said in a statement that he is "confident that the PSC will operate in the best interest of Florida's citizens — not at the behest of outside influences.

"It has always been the Senate's intent, as a legislative body, to confirm those nominees to the PSC that will bring expertise to the commission and will work in the best interest of Florida's consumers and ratepayers," Haridopolos said. "In 2010, the Senate rejected PSC nominees for the simple reason that they were unqualified, as proven in their testimony in various committees."

One of the issues was that Argenziano, a former state senator, did not have a college degree.

Despite Haridopolos' assertions, Argenziano argues that the weight of the political donations by the utilities does influence the commission's decisions.

"The utilities don't give them millions of dollars for nothing," said Argenziano, angered by the process that ousted her. "They pay to pick the people they want in that process.

"The people are screwed — until the Legislature is not in control anymore," she said. "There is no fairness. There's no way in hell that the people are going to get a fair shake."

Bill Newton, executive director of the Florida Consumer Action Network, said he sees the PSC members "as puppets."

"They're just window dressing for the Legislature," Newton said. "It's a rotten deal for consumers. The Legislature needs to fix it. The process has been corrupted."

• • •

Argenziano says she is working to have the PSC removed from under the control of the Legislature to help guard the process from politics. She said she would rather see the commission under the authority of the Attorney General's Office or some other entity that the people could hold accountable better than the 40 members of the state Senate who confirm the commissioners.

"People are not represented well this way," Argenziano said. "Take them away from the money.

"The Legislature wants their puppets at the PSC," she said. "There needs to be some changes, some major changes."

Times staff writer Connie Humburg and researcher Natalie Watson contributed to this report. Ivan Penn can be reached at ipenn@tampabay.com or (727) 892-2332.

Who is on the PSC?

Editor's note: Correction notice appended below.

Members of the state Public Service Commission decide what rates utility customers will pay in their bills. The $132,000-a-year jobs are full-time, but the five commissioners also have business lives outside the PSC. Here's a brief look at who they are:

Art Graham, outgoing chairman

Term: Appointed by former Gov. Charlie Crist in July 2010 and reappointed by Gov. Rick Scott for a term that ends January 2014.

Other jobs: City of Jacksonville; ART Environmental, a consulting firm he runs as the sole owner; rental property landlord, according to his financial disclosure form.

Background: Chemical engineering degree from the Georgia Institute of Technology; former Jacksonville City Council member and Jacksonville Beach City Council member; former regional sales manager for Goodyear Tire and Rubber.

Party affiliation: Republican

Ronald Brise, incoming chairman

Term: Appointed by former Gov. Charlie Crist in July 2010 and reappointed by Gov. Rick Scott for a term that ends January 2014.

Other jobs: Sole proprietor, Strategic Partner Consulting LLC, in North Miami. According to his financial disclosure, his company receives its income from the Miami Union Academy, a K-12 education program.

Background: MBA degrees in management and marketing from American Intercontinental University in Illinois; former member of the state House of Representatives; former chief operating officer for an Internet telecommunications carrier.

Party affiliation: Democrat

Eduardo Balbis

Term: Appointed by former Gov. Charlie Crist in July 2010 and reappointed by Gov. Rick Scott for a term that ends January 2015.

Other jobs: City of West Palm Beach; NCAA football official, according to his financial disclosure form.

Background: Environmental engineering degree from the University of Florida; former assistant city administrator for the city of West Palm Beach, where he managed public utilities, public works and engineering departments.

Party affiliation: Republican

Julie Brown

Term: Appointed by former Gov. Charlie Crist in 2010 and reappointed by Gov. Rick Scott for a term that ends January 2015.

Other jobs: First American Corp., and J. T. Swann Realty Inc., according to her financial disclosure form.

Background: Law degree from the University of Florida; former assistant city attorney for the city of Tampa.

Party affiliation: Republican

Lisa Edgar

Term: Appointed by former Gov. Jeb Bush for a term that began in January 2005. She was chairwoman from January 2005 to January 2008. Former Gov. Charlie Crist reappointed her to a four-year term that began January 2009 and ends December 2012.

Other jobs: No other income sources reported.

Background: Law degree from Florida State University; former deputy secretary of the state Department of the Environment.

Party affiliation: None


CORRECTION: Public Service Commission member Julie Brown has a financial disclosure on record with the state Ethics Commission for another public position and was not yet due to file one in her capacity with the PSC. Versions of this story appearing in print and online incorrectly stated the status of her disclosure.

Upcoming PSC hearing on Progress Energy's $2.5 billion repair bill is unprecedented 12/24/11 [Last modified: Thursday, January 5, 2012 5:58pm]

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