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TECO's tactics attacked

As TECO Energy Inc. struggles to cope with a debt burden in the billions of dollars from money-losing investments in out-of-state power plants, critics increasingly are accusing the utility of shortchanging its hometown Tampa Electric Co. customers.

In complaints to state regulators, consumer advocates, big industrial customers and business competitors say Tampa Electric forged a sweetheart deal with TECO Transport, a corporate sibling. And they say the company's early shutdown of coal-fired generators at its former Gannon power station in Tampa gave the company economic benefits at the expense of customers.

"I would characterize that as misguided," said Tampa Electric spokesman Ross Bannister. "It's almost a scare tactic. What you've got are really baseless facts."

The company's top executives say they're shifting away from the speculative ventures that got the utility in trouble and back to its reliable regulated businesses, Tampa Electric and Peoples Gas System.

But in the meantime, the critics contend that TECO's frenetic efforts to get its finances in order are taking a toll. In testimony filed earlier this month with the Florida Public Service Commission, utility consultant Sheree Brown of Alliant Energy Integrated Services in Orlando urged the PSC to take steps to protect Tampa Electric ratepayers from subsidizing TECO's financially distressed subsidiaries. She was representing Tampa Electric's business customers who are members of the Florida Industrial Power Users Group and the Florida Retail Federation.

Limiting the free flow of cash from Tampa Electric would not only save customers money, Brown said, but would benefit Tampa Electric's creditworthiness. She noted that ratings agencies have downgraded the otherwise healthy subsidiary's debt because of its exposure to problems elsewhere at TECO.

In rebuttal testimony filed with the PSC, Denise Jordan, director of rates and planning in Tampa Electric's regulatory affairs department, said Brown "merely assumes bad faith on the part of Tampa Electric and concludes that some type of subsidy may have occurred."

Concern about whether TECO's troubles are hurting Tampa Electric customers will come to a head Nov. 12 to 14, when the PSC is scheduled to hold its annual hearings on fuel-cost calculations from TECO and other Florida investor-owned utilities. Utilities are allowed to pass through to consumers any increases in their fuel costs. The PSC will determine whether the companies' cost calculations were fair.

Tampa Electric has asked to increase its monthly residential rate by 5.7 percent to $99.47 per 1,000 kilowatt hours, which would remain the highest rate among Florida's five investor-owned utilities. The company's early shutdown at the Gannon coal plant and the coal-transport contract are scheduled to be part of these fuel-cost discussions. Here's a look at the disputes:

Bayside power station

This year marked a turning point for Tampa Electric's 46-year-old Bayside power station on Port Sutton Road near Hillsborough Bay, formerly known as Gannon power station. Under an agreement with the federal government to settle repeated violations of the federal Clean Air Act, Tampa Electric agreed to shut down all six of its coal-fired generators at Gannon by the end of 2004 and replace them with two cleaner, natural-gas-burning units.

Earlier this year, the company informed the PSC that it planned to shut down the first four units in the spring and fall. Three of the units have been shut down, while the fourth is being used on an as-needed basis.

The early shutdown and conversion to natural gas will benefit air quality. But critics say Tampa Electric's real motivation was to help shore up its balance sheet, at the expense of customers.

Although Florida utilities are allowed to pass on increased fuel costs to consumers through higher rates, any increases in operations and maintenance costs must be absorbed by the utility through lower earnings.

Because the coal generators were in need of maintenance, Tampa Electric's decision to shut them down early saved the company money. Also, gas plants require far fewer personnel and are thus much cheaper to run. But because natural gas costs more than coal, the early conversion to natural gas generators means bills for Tampa Electric customers will rise sooner than they would have otherwise.

This has raised the ire of consumer groups, as well as the public counsel's office, the state's consumer advocate on utility issues.

The public counsel's office has asked the PSC to require Tampa Electric to pass back to consumers the $25.1-million that it will save in 2003 and 2004 from the early shutdown of the coal units. That would lop off $1.78 from the utility's requested $5.33 rate hike per 1,000 kilowatt hours.

"Tampa Electric's decision to close the Gannon units early was an economic decision that benefits the company with (operations and maintenance) savings while customers are forced to pay higher fuel costs," the public counsel's office said in a filing Thursday with the PSC.

Tampa Electric counters that there aren't any actual cost savings because funds not needed for the coal plants are being plowed back into operating expenses for the two new gas units at the facility, as well as for their debt service and depreciation and capital expenses.

TECO Transport

Most days, ships owned by TECO Transport leave a Louisiana port with 28,000 to 33,000 tons of coal to make the 500-mile, two-day journey to Tampa Electric's Big Bend power station near Apollo Beach. It's been pretty much the same routine for more than 40 years, as Tampa Electric's corporate parent provided its own transport service.

But the latest renewal of a five-year contract with TECO Transport sparked controversy because TECO ignored requests by the staff of the PSC to rewrite its bid requirements in order to increase the potential pool of bidders.

Critics say the urge to keep the transport contract in-house was too great to resist, considering that Tampa Electric provided 43 percent of TECO Transport's total revenue last year. TECO said earlier this year that it was considering the possibility of selling TECO Transport to raise cash, although the company says it has since dropped those plans.

Although the coal-to-gas conversion of the Bayside power station will result in a sharp drop in Tampa Electric's consumption of coal, coal still remains a major fuel source for the company. All four generating units at the company's Big Bend power station continue to run on coal, as does its Polk power station in Polk County.

Under the new contract with TECO Transport, Tampa Electric says that it will pay a per-ton rate slightly lower than under the previous contract. The company contends it's at or below prevailing market rates. But opponents, including consumer groups, the public counsel's office and freight company CSX Transportation _ a potential competitor for the transport contract _ maintain that the company could have obtained a better deal had it not drawn up bid requirements that they say favored TECO Transport.

To ensure the PSC has enough time to consider the dispute, the PSC staff has recommended the commission vote Monday to separate review of the Tampa Electric-TECO Transport contract from the Nov. 12-14 fuel hearings and hold it at a later date.

_ Louis Hau can be reached at hausptimes.com or (813) 226-3404.

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