Public Service Commission rubber-stamps a rate increase

The Florida Public Service Commission made history Tuesday, but not in a good way.

Commissioners approved a $4.9 billion rate increase for Florida Power & Light customers over the next four years. It’s the largest increase any commission has approved.

That increase will hit residential customers proportionately much harder than large businesses — another first. Bradley Marshall, a lawyer for the environmental group EarthJustice, which opposed the increase, said it will shift more than $1 billion from companies to homeowners.

Finally, this unprecedented increase had the support of the agency that represents customers. The Office of Public Counsel, under new management designed to please FPL, abdicated its responsibility and acted as FPL’s ally.

None of these precedents bothered the commissioners. No one asked any probing questions. Commissioners didn’t ask for a recommendation from the PSC staff.

The deal is a settlement of FPL’s original request for $6.2 billion. FPL proposed the settlement. Objecting parties raised several legal issues. There was no substantive discussion of those issues. FPL got what FPL wanted.

FPL President/CEO Eric Silagy said the agreement “benefits all 5.6 million FPL customers and our state by keeping bills low and accelerating investments in clean energy.” Under the deal, the company will invest in solar power. Silagy called it “America’s best energy value — electricity that’s not just clean and reliable, but also affordable.”

Silagy has reason to be happy. FPL’s midpoint profit margin of 10.6% will be higher than what the commission just allowed two of Florida’s other investor-owned utilities. It is higher than the national average. More important, critics say, accounting practices in the agreement could allow FPL to make as much as the company wanted in the first request.

The key is something called reserve surplus amortization mechanism, or RSAM. Amortization is the gradual writing down of assets. In FPL’s case, that means power plants.

With that provision, critics say, FPL could use years of accumulated amortization to keep earnings as high as possible. The company can make a profit of up to 11.6% before having to return any money to customers.

Floridians Against Increased Rates (FAIR) is one of the groups that opposed the settlement. FAIR argued that the RSAM provision would give FPL an additional $1.4 billion over the four years of the agreement — even more than the $6.2 billion it had originally requested.

FAIR called Tuesday’s hearing “a terrible day for FPL customers. … Taking nearly $5 billion out of the pockets of Florida homeowners and businesses and handing it to FPL is not justified by the law, by the facts or by any objective standard.”

Utility regulation means finding the proper balance between what companies need to create a reliable power grid and the interests of customers. To do that, FPL claimed, it needs nearly $5 billion between 2022 and 2025.

FAIR and other groups, however, argued that the company could make all necessary investments with much less money. FAIR proposed eliminating next year’s increase of $692 million. Doing so would have saved customers almost $2.8 billion through 2025.

Instead, the average residential bill will be 20% higher in four years. Another increase almost certainly awaits for 2022.

Next month, FPL files its estimate for fuel costs. Natural gas, the company’s main source, has doubled in price this year. Forecasts are for more increases next year.

FPL can pass along the cost of fuel to customers. The company can’t make more profit when fuel costs rise, but it also can’t lose money.

From a political standpoint, FPL crafted this settlement perfectly. The business break won over the Florida Retail Federation and the Florida Industrial Power Users Group. The solar investments brought abroad the Southern Alliance for Clean Energy. Those groups had fought previous rate increases.

Because the Legislature forced out J.R. Kelly, who regularly challenged FPL’s demands, the customers’ representative was Public Counsel Richard Gentry. He’s a former lobbyist for the state’s homebuilders.

Gentry could have relied on Charles Rehwinkle, the office’s best litigator. But Rehwinkle had almost no participation in the rate case.

Groups that oppose the settlement can appeal to the Florida Supreme Court. Kelly did so successfully when FPL tried to bill customers for its fracking venture in Oklahoma. The company had to refund its expenses.

But six of the seven justices were appointed by Govs. Rick Scott and Ron DeSantis, the same governors who have stacked the Public Service with utility-friendly appointees. Still, the justices at least might ask more questions than the commission did.

FPL delivers power at a good price. We continue to believe that the price could be lower. FPL is a well-run company, but its biggest asset is control of Florida’s political power grid. The Sun Sentinel Editorial Board consists of Editorial Page Editor Steve Bousquet, Deputy Editorial Page Editor Dan Sweeney, and Editor-in-Chief Julie Anderson. Editorials are the opinion of the Board and written by one of its members or a designee. To contact us, email at letters@sun-sentinel.com.