Decision to come on FPL tax windfall
Customers may have $772M annual refund coming via lower electric rates
Florida Power & Light Co. customers will find out Tuesday whether they’ll have a $772 million annual tax refund coming their way in lower electric rates, possibly in the fall.
The Florida Public Service Commission, which regulates electric utilities, is scheduled to consider the tax issue at its regular conference on Tuesday in Tallahassee.
Last week, the commission’s staff issued a recommendation saying the tax savings should be returned to customers. And while it doesn’t have to do so, the commission often follows its staff’s recommendations.
“FPL should reduce its base rates by the $772.3 million in annual tax savings stipulated to by the parties,” the staff recommendation says of the Florida Public Counsel and other watchdog groups that petitioned for a rate review.
After Hurricane Irma swept through the state in September 2017, causing widespread damage to the electric grid, FPL claimed restoration costs of about $1.3 billion. Just three months later, Congress and President Donald Trump approved the federal tax overhaul that lowered the corporate income-tax rate from 35 percent to 21 percent.
FPL customers paid taxes when they paid their monthly electric bills; while the utility got a huge break on their 2018 taxes, customers’ bills have not declined as a result.
The Public Counsel requested the commission review FPL’s base rates in light of the way the utility handled the storm cost recovery from Irma. FPL used money from its storm reserve to pay for its estimated $1.3 billion in recovery costs from Irma. The Juno Beach-based utility then used its federal tax windfall from the 2017 tax cut to replenish the storm reserve.
FPL argues that customers benefited because it didn’t pursue a storm surcharge, the typical way that customers pay to help a utility recover from a storm. In January 2018, FPL announced that it would not seek a storm surcharge from the Public Service Commission; instead, it would use the tax savings.
“The timing of federal tax reform, coming on the heels of the most expensive hurricane in Florida history, created an unusual and unprecedented opportunity,” said Eric Silagy, FPL’s president, at the time of the announcement.
In contrast, other Florida utilities including Duke Energy and Tampa Electric Co. agreed to return their tax savings to customers, according to the Public Counsel.
FPL has argued that it has the discretion to use its tax savings how it wants, without having to ask permission of the Public Service Commission. The utility also says it not prohibited from
using its storm reserve to recover storm costs, as long as it stays within its authorized range of profit.
“We’re cautiously optimistic,” said J.R. Kelly, Florida’s Public Counsel. Two Tallahassee-based groups, the Florida Retail Federation and the Florida Industrial Power Users Group, which represents big power users, joined the petition for tax savings to be returned to customers.
Kelly had argued that FPL had “extinguished” its storm reserve and shouldn’t get to deduct Irma’s costs from tax savings. But the staff recommendation disagrees with that, saying FPL should be allowed to deduct storm costs before returning the tax savings to customers.
The Irma recovery amount is expected to be determined by the commission in June, and, if the commission agrees with its staff recommendation, FPL customers might see their electric bills reduced in October or November, Kelly said. He couldn’t say how much they might be reduced.
Jon Moyle, lawyer for the Florida Industrial Power Users Group, said the commission has already ordered every other electric utility to flow back tax savings to customers, so he is hopeful the commission will accept the staff’s recommendations.
“FPL customers will benefit greatly from a $772 million rate reduction,” he said.
Tuesday’s commission conference, which begins at 9:30 a.m., can be watched online on The Florida Channel at http:// www.floridapsc.com.