For Tampa Electric, the costly sanction could be yet to come

This week the federal Occupational Safety and Health Administration slammed Tampa Electric for a June accident that killed five workers, hitting the company with a six-figure fine.

Next, the Florida Public Service Commission will decide whether the accident will have a bigger impact on the company’s bottom line.

The PSC has the power to determine what costs, if any, Tampa Electric can pass along to customers after an accident. Utilities cannot pass along fines imposed by OSHA, but they can recover money spent on additional fuel or replacement power from other utilities.

Costs that aren’t passed along come out of the company’s profit margins.

If Tampa Electric tries next year to recover power or fuel it had to buy because of the accident, PSC staffers will examine the “management decisions” leading up to the accident to decide whether cost recovery is appropriate — or whether the company’s shareholders should foot the bill, attorney Keith Hetrick said.

J.R. Kelly, who represents consumer interests in front of the PSC, said his office would challenge any attempts at cost recovery.

Tampa Electric spokeswoman Cherie Jacobs declined to say how much the company spent on fuel and power after the accident at Big Bend Power Station in Apollo Beach, or how much it might seek to recover. But she said the company’s total purchased power and fuel costs for 2017 were lower than projected, largely because after the accident neighboring utilities had sold power to Tampa Electric at cost.

The utility will not attempt to recover other costs aside from power purchases related to the accident, Jacobs said.

What the PSC decides will be a key factor in determining how deeply the company will suffer financially from the accident.

OSHA fined Tampa Electric $139,000 for two violations of its workplace safety rules. The amount, which is set by Congress, is relatively small compared to the costs of running a power plant and the company’s $250 million profit last year.

Historically, after an accident, power purchases are a much larger cost. When a 1999 explosion left Tampa Electric’s Gannon power station hobbled, the company spent $5 million on replacement power and fuel. The PSC later allowed it to recover the cost.

Florida utilities are allowed to pass unexpected costs along to their customers so they earn enough revenue to provide quality services. As regulated monopolies, they are essentially guaranteed a profit.

Every summer, the companies file to the PSC to recover extra fuel costs and purchased power from the previous year. The commission then goes through each line and verifies all of those costs were justified.

In the Tampa Electric case, Hetrick said, the PSC will first “determine if there were any incremental costs associated with the accident.” If costs are found, he said, the commission can contest them if it believes ratepayers should not be held responsible.

But Ben Wilcox, of the watchdog group Integrity Florida, said history suggests Tampa Electric would get what it wanted.

“It’s been our experience that the PSC typically responds favorably to cost-recovery requests from utilities,” he said.

There is a high legal bar for forcing a utility to bear the burden of an expensive accident. In the late 1970s, for example, the PSC tried to reject the attempt by Florida Power Corp. — now Duke Energy — to recover $13 million after a mishap at a nuclear plant based on a notice of violation issued by the Nuclear Regulatory Commission. But the Florida Supreme Court later ruled the federal agency’s report wasn’t enough evidence to reject the cost recovery.

The ruling played into the PSC’s decision to let Tampa Electric recover the costs of the 1999 explosion, which killed three workers.

The PSC spent six months reviewing that accident, a process that involves taking depositions and touring the plant. In the end, the commission could not find systemic management issues that caused the accident — even though a month earlier, OSHA determined company “complacency” about safety was to blame.

The June 29 accident at Big Bend claimed the lives of five workers: senior plant manager Michael McCort, 60, and contract workers Christopher Irvin, 40; Frank Lee Jones, 55; Antonio Navarrete, 21; and Amando Perez, 56.

The men were trying to unclog a 30-foot tank when they were covered with thousands of gallons of molten slag, a byproduct of burning coal.

In August, a Tampa Bay Times investigation found at least three Tampa Electric workers were injured performing a near-identical task in 1997, and that a committee of employees and managers had drawn up safety guidelines prohibiting the practice unless the unit was turned off. But in 2015, the Times found, the union filed a complaint alleging members were again being assigned the risky work.

The fine issued Thursday by OSHA stemmed from a “willful violation,” the agency’s most serious infraction, given when employers disregard safety. OSHA said Tampa Electric ignored its own rules and failed to provide an environment “free from recognized hazards that were causing or likely to cause death or serious physical harm.”

Jacobs said Tampa Electric disagreed with the suggestion it had acted with deliberate indifference to safety.

Hetrick said OSHA’s findings would help inform the commission if Tampa Electric attempted to recover costs associated with the accident, but that the PSC would “render its own decision at the appropriate time.”

There were signs that the commission’s staff has already been considering the matter. Internal emails obtained by the Times show PSC staff shared the findings of the newspaper’s August investigation, then emailed each other copies of the Supreme Court’s ruling in the Florida Power Corp. cost recovery case.

Contact Kathleen McGrory at kmcgrory@tampabay.com or (727) 893-8330. Follow @kmcgrory.