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Florida utilities want customers to pay for ‘economic development’ - whatever that is

Florida Power & Light, Gulf Power, and Tampa Electric are hoping to bump up their spending on “economic development” and pass along the costs, according to documents recently filed with the PSC.
Published May 31, 2019

TALLAHASSEE -- According to recent filings with the Public Service Commission, the state’s top power companies are pushing to significantly increase how much “economic development” spending they are allowed to pass along to customers.

Florida Power & Light, Gulf Power, and Tampa Electric are hoping to bump up their spending on “economic development” from $3 million and pass along the costs, according to documents recently filed with the PSC.

When asked what “economic development” meant to utilities, answers ranged from rate reduction programs to marketing campaigns to trade missions.

The petition was brought up at a May 14 PSC meeting but was tabled for the next meeting expected to happen June 11.

The utilities hoped to change the annual cap from $3 million to 0.15 percent of each companies’ gross annual revenues.

PSC staff recommends that the cap on spending be raised to $5 million or 0.15 percent of each companies’ annual revenue from retail customers to address the effects of inflation since the cap was set in 1995. By comparison, $3 million in 1995 dollars equals about $4.95 million today, according to the staff recommendation.

The staff recommendation excludes wholesale customers from the percentage of the companies’ annual revenue.

According to staff, 95 percent of the contribution will come from ratepayers and 5 percent will come from company investors. This sharing requirement was set in 1998.

FPL, the state’s top utility in number of customers, hopes to increase its “economic development” spending to a “more realistic level” of about $16 million per year, according to its PSC filing. That number equals 0.15 percent of the company’s gross annual revenue.

The utilities also proposed to gradually escalate the cap by 0.025 percent each year. By 2023, for example, caps on FPL, Gulf Power and Tampa Electric would reach 0.25 percent of each company’s gross annual revenue, or $26.7 million, $3.8 million and $4.9 million, respectively.

The PSC staff, which historically sides with the utilities, said it does not believe the phased-in increases are warranted. If the utilities later determine that their “economic development” is hindered, then it can be addressed in a rate case or another stab at a proposal to amend the rule. Staff also wrote that while the PSC should continue to encourage economic development, it should also consider moderation in the increase of recoverable expenses.

FPL says its current cap, which was set in 1995, is out of date. In its filings, the company says the budget is used to “expand the promotion of the state’s favorable business climate” and will go toward things like strategic planning, marketing and research. During a recent staff workshop, FPL explained that the $3 million cap creates “tension” between funding for economic development staff and other activities like rate discounts.

It says customers will see no rate increase as a result of the amendment, but a staff analysis of the proposed rule change says a residential customer using 1,000 kilowatt hours would be charged an extra $0.12 per month, or $0.18 for 1,500 kilowatt hours. Using an air-conditioner for eight hours a day, for example, would be about 340 kilowatt hours per month. A pool pump adds up to about 1,240 kilowatt hours per month.

The PSC does not track average kilowatt hour usage by household.

FPL’s economic development efforts over the years have contributed billions to Florida in new businesses and jobs, spokesman Chris McGrath said. It’s money “well-invested” for customers, he added.

McGrath said some of the outreach involves traveling, attending state-sponsored mission trips, trade shows and “whatever we can do to get the word out about the business climate in Florida.

FPL CEO Eric Silagy’s trip to Israel with Florida’s Cabinet members, lawmakers, academics and other interest groups will not be paid for out of the economic development budget, McGrath said.

“We have pretty demonstrative proof that economic development and bringing business to the state benefits customers,” McGrath said. “When you’re able to spread the costs over more customers, it puts downward pressure on rates.”

TECO said the cap in its current form will prevent it from keeping pace with the company’s growth. Over the last five years, its economic development spending has attracted 156 new and expanding businesses, which has translated to approximately 20,834 full-time jobs and $1.6 billion in new direct capital investment to the Florida economy, according to its PSC filings.

Cherie Jacobs, a spokeswoman for the company, said the company supports economic development by “being a good community partner in the regions we serve.”

For example, TECO has members on the Tampa and Hillsborough Economic Development Councils and local chambers of commerce. In the future, it hopes to use the spending to help existing businesses stay and grow, as well as attract new businesses to the area.

Gulf Power said its commitment to working with nearly 200 businesses to expand in Florida will have a large economic impact, and that it uses the money to invest in programs that help develop project-ready sites, support economic development partners and market Northwest Florida throughout the international and national business communities. It also actively promotes the retention of exiting military personnel in Northwest Florida.

Kimberly Blair, a spokeswoman for Gulf, said the company sees the need to raise the cap on how much economic development spending can be passed off to ratepayers because the company knows that it works.

Like FPL, Blair also said that rates could potentially decrease over time since fixed costs would be spread across more customers if more people and businesses move into the state.

“Over time, modifying the limit will help with expanding the promotion of Florida as a premier business destination to a targeted audience of corporate decision makers and site selectors, thus improving the prospects for attracting additional businesses to the state, enhancing economic development and creating jobs within the state,” she said.

According to a staff recommendation, neither Gulf nor TECO are currently spending up to the existing cap limits and have no immediate plans to increase their activities should the cap be increased.

Florida Public Utilities Company, which serves residential, commercial and industrial markets throughout Florida, said it uses the economic development funding for things like attending trade shows, fundraisers and sending employees to meetings with business chambers across the state.

It also funds a rate reduction program to attract businesses but according to its PSC filings, there are no participants in the program.

A spokesman for the company did not respond to requests for comment.

The PSC will vote on the rule change June 11.

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