Progress Energy Florida is asking for a $500 million annual increase in its base rates, a 30 percent hike.
(1) Is an increase of that size justified?
(2) If not, how are the people to fight it? (For the answer, read on. You can get started as early as this Thursday.)
The answer to question (1) is, of course, no. The company is shooting for a rate of return on its stockholders' money of 12.54 percent.
Twelve and a half percent! Who gets that these days? A company lawyer argued the other day that Progress has to compete "with the IBMs, the McDonald's, the Wal-Marts of the world for investors."
Phooey. Nuts. Apples and oranges. The company is a perfectly reliable investment. It has been stumbling by, somehow, on a paltry 9 percent plus. The state Public Service Commission should not give it much more. This puppy needs to come in under 10 percent.
"People look to utilities for stable, firm investments," says J.R. Kelly, the state's public counsel, who represents customers in utility cases.
"They have a monopoly. They have a captured audience. McDonald's has to compete with Burger King and Wendy's — their income is not guaranteed."
It's also high time that the PSC use this rate case to dig deeper into Progress' books — into what counts as an "expense" above the bottom line, before we even get to the question of profit.
Here's an example: The Office of Public Counsel thinks Progress is writing off the value of its plants too fast. This means a higher depreciation expense, paid for by customers. There's also fighting over how the company is counting pension expenses.
I would like to tell you that the PSC has been a tough, aggressive regulator.
I would like to tell you that.
Unfortunately, in its last time at bat, the PSC gave a sloppy wet kiss to Tampa Electric Co. this spring. The national average return is 10.29 percent. The PSC's own staff had recommended 10.75 percent. The PSC said "what the heck" and awarded Tampa Electric 11.25 percent.
As for Progress, so far the PSC has been a purring kitten, letting the company have "interim" rate increases even before this big one is approved (hey, they'll refund it later if they don't approve it), and allowing the company to bill now for the cost of converting one of its plants from oil to gas. The PSC's only recent ruling against Progress, for overcharging for coal, will reduce the typical bill — next year — by 25 cents a month. Wooo!
By the way, we're not even talking about billing customers in advance for a nuclear power plant, or fuel charges and such. All that stuff is separate these days.
The second question was, how can the public fight this?
One way will be to show up at the public hearings around the state. One in Pasco County last week was well attended.
There will be hearings this Thursday in St. Petersburg (9 a.m. at City Hall, 175 Fifth St. N) and Clearwater (6 p.m. in the County Commission room, fifth floor, 315 Court St.)
And beyond that? Well …
Gov. Charlie Crist, who wants to be a U.S. senator, chooses the PSC — these are his folks making this decision. Bill McCollum, the attorney general, and Alex Sink, our chief financial officer, want to be governor. So I would raise heck with all of them, too, and make them take a stand.
Time to step up.