Mostly Cloudy86° WeatherMostly Cloudy86° Weather
A Times Editorial

Utilities learn what 'no' sounds like

The Florida Public Service Commission, the longtime lap dog for utilities, bit back this week. The PSC denied significant revenue increases for the state's two largest electric utilities, Florida Power & Light and Progress Energy, and signaled the regulatory environment has changed for the better for consumers. The utilities groused and financial analysts shuddered, but the commission's decisions were reasonable and reflect today's economic realities.

Progress Energy initially sought a $500 million increase in revenue. As the economic recession deepened and populist opposition rose, it would have gladly settled for the PSC staff recommendation of a return of 11.25 percent, or a $180 million increase in revenue. Instead, the commission unanimously voted to set Progress Energy's return at 10.5 percent, allowing a more modest increase in revenue of some $140 million and keeping customer bills about the same. FP&L's return was set at 10 percent, which also is below the PSC staff recommendation. Many unregulated companies would celebrate double-digit returns now, but the utilities are accustomed to getting their way in Tallahassee.

Vincent Dolan, president and chief executive officer of Progress Energy Florida, told the Times editorial board Wednesday there will be repercussions and "everything is on the table.'' He mentioned the possibility of reducing tree-trimming, maintenance on utility facilities and performance pay incentives for employees. He did not mention investing more profits into the company and reducing the return for stockholders. And Progress Energy seemed to provide reliable electric service just fine in 2007 and 2008 with returns below 10 percent.

The broader question is how the PSC's decisions will affect the ability of Progress Energy and FP&L to raise capital in the financial markets. But the rate cases should be kept in perspective: They affect less than half of the utilities' costs. The utilities separately pass on to consumers costs for such expenses as fuel, energy efficiency programs and new power plant construction. Progress Energy already is taking advantage of a state law enabling it to charge its customers up front for construction of a new nuclear power plant.

Dolan points out there are costs to shifting from coal to other fuel alternatives, encouraging energy efficiency and cultivating renewable energy sources. Smart policy changes cannot get too far in front of the public's willingness to pay for them. Yet Progress Energy also is fighting the PSC's recent decision to modestly raise energy efficiency targets that were too low and easily achievable.

In some ways, the electric utilities brought this situation upon themselves. They cultivated cozy relationships with the PSC and its staff for years. FP&L's behavior was particularly offensive. Its executives socialized with PSC staff members and a commissioner, and its lobbyist sought instant messaging codes for some PSC staffers. Now the utilities are feeling the combined backlash of a political reaction — Gov. Charlie Crist publicly opposed the rate increases and just appointed two new PSC members — and an economic recession.

While the reawakened PSC acted responsibly, count on the utilities to return before long with another request to increase revenues. Both the regulators and the regulated should focus on long-term energy policy rather than short-term utility profits.

Utilities learn what 'no' sounds like 01/13/10 [Last modified: Wednesday, January 13, 2010 6:50pm]

    

Join the discussion: Click to view comments, add yours

Loading...