On the eve of hearings about how much Florida Power charges consumers, the utility and organizations representing its 1.4-million customers reached a tentative agreement to reduce rates.
Details won't be released until the parties put the deal in writing and submit it to the Florida Public Service Commission by next Wednesday, Florida Power and consumer groups said Wednesday.
But members of the PSC, which has the final say on any rate change, were encouraged that all sides worked out an agreement before five days of hearings and legal maneuvers that were scheduled to culminate with a decision June 11.
"Good settlements are in the public interest, and I'm expecting to see a good settlement," said PSC chairwoman Lila Jaber. "I hope it works out for the citizens of the state of Florida and spares them costly litigation."
A deal also benefits Florida Power's parent, Progress Energy. Share prices for the company headquartered in Raleigh, N.C., had been held in check as investors waited to see how big a rate cut the PSC might order, according to analyst Paul Ridzon of McDonald Investments.
"This reduces the uncertainty," he said. "As long as there's the risk out there, investors will discount the stock." The stock closed Wednesday at $47.53, up 72 cents.
Even before Carolina Power & Light bought Florida Progress, former parent of Florida Power, in November 2000 for $5.3-billion, executives pledged to pass along a share of the savings from combining operations. The company said those saving will total $175-million annually by next year.
But consumer advocates balked at Florida Power's original proposal to cut base rates, not including charges for fuel and other variable costs, by $5-million a year for 15 years. Under the utility's opening offer, the monthly bill for a residential customer using 1,000 kilowatt hours would be cut from $91.65 to $87 by 2004.
The Office of Public Counsel, the state-paid advocate for customers of privately owned utilities, countered that Florida Power should reduce rates by $246-million annually. Representatives of commercial and industrial customers also proposed substantial rate cuts.
One big sticking point was Florida Power's contention that customers should foot the bill for a share of the $925-million premium CP&L paid for Florida Progress over its market value.
The utility argued that the merger savings wouldn't happen without the premium. Florida Power subtracted a share of the premium and takeover costs and other adjustments from the merger savings to reach the $5-million annual rate cut for customers.
But Public Counsel Jack Shreve and attorneys for large customers contended that charging consumers for the premium violated Florida law.
The premium was among dozens of issues spelled out in a 103-page prehearing order, including:
The rate of return on equity Florida Power should earn. The utility wanted the return increased from 12 percent to 13.2 percent. Consumer groups and the PSC staff proposed rates from 9.5 percent to 11.5 percent.
The quality of customer service. Shreve contended the PSC should punish Florida Power for frequent electricity outages and problems resolving customer complaints. The utility said it is improving reliability and does a good job handling consumer problems.
Whether consumers should pay $69.7-million in "transition costs" from the merger. Shreve said the costs, mostly separation payments to former Florida Progress executives, should not be charged to customers.
Officials with Florida Power and Shreve's office declined Wednesday to discuss any specifics before the deal is filed with the PSC.
_ Steve Huettel can be reached at huettelsptimes.com or (813) 226-3384.