Pe­ti­tion: FPL needs to re­fund cus­tomers $700M

Sun Sentinel Palm Beach Edition - - FRONT PAGE - By Jim Saun­ders

In a high-stakes case, at­tor­neys for con­sumers and two busi­ness groups are ask­ing state reg­u­la­tors to re­quire Florida Power & Light to re­fund as much as $736 mil­lion to cus­tomers and are call­ing for a re­view of the util­ity’s base elec­tric rates.

The state Of­fice of Pub­lic Coun­sel, which rep­re­sents con­sumers in util­ity is­sues, the Florida Re­tail Fed­er­a­tion and the Florida In­dus­trial Power Users Group filed a pe­ti­tion Wed­nes­day at the state Pub­lic Ser­vice Com­mis­sion. In part, the pe­ti­tion fo­cuses on tax sav­ings un­der last year’s fed­eral tax over­haul and a con­tention that FPL has ex­ceeded a limit on prof­its in­cluded in a 2016 rate set­tle­ment.

“The is­sue pre­sented in this pe­ti­tion is the de­ter­mi­na­tion of the fair, just, and rea­son­able rates to be charged by FPL fol­low­ing the wind­fall cost re­duc­tion re­sult­ing from the [fed­eral tax over­haul],”

the pe­ti­tion said. “Sev­eral pro­vi­sions of [state law] re­quire the com­mis­sion to set rates for FPL that are fair, just, rea­son­able, and not un­duly dis­crim­i­na­tory, and pro­vide sub­stan­tially af­fected par­ties the op­por­tu­nity to pe­ti­tion the com­mis­sion seek­ing rate ad­just­ments to en­sure that a pub­lic util­ity’s rates are fair, just, and rea­son­able.”

But FPL quickly fired back Thurs­day, say­ing in a state­ment that its rates are among the low­est in the na­tion and that the pe­ti­tion, if ap­proved, would re­sult in higher elec­tric rates. A spokesman also said the util­ity has not ex­ceeded a max­i­mum “re­turn on eq­uity,” a closely watched mea­sure of prof­itabil­ity, in­cluded in the 2016 rate set­tle­ment.

“We are proud to serve our cus­tomers, and on be­half of all of them, we in­tend to fight this po­lit­i­cally mo­ti­vated ac­tion,” the util­ity said in a state­ment. “If OPC, FRF and FIPUG [the Of­fice of Pub­lic Coun­sel and busi­ness groups] are suc­cess­ful with this, our cus­tomers will be pay­ing higher rates and mas­sive lit­i­ga­tion costs. Noth­ing about this ac­tion seems log­i­cal, sen­si­ble or in the best in­ter­ests of cus­tomers.”

The pe­ti­tion in­volves a com­pli­cated mix of ac­count­ing is­sues, the 2016 rate set­tle­ment, the fed­eral tax over­haul and FPL’s Hur­ri­cane Irma restora­tion costs.

Base rates are per­haps the most-con­tro­ver­sial is­sue in util­ity reg­u­la­tion, with rate cases typ­i­cally tak­ing months and re­quir­ing ex­ten­sive in­ves­ti­ga­tion of util­ity fi­nances and op­er­a­tions. The Pub­lic Ser­vice Com­mis­sion ap­proved the 2016 set­tle­ment, which froze FPL’s base rates with some limited ex­cep­tions. The Of­fice of Pub­lic Coun­sel and the Florida Re­tail Fed­er­a­tion were par­ties to the multi-year set­tle­ment.

The set­tle­ment in­cluded nu­mer­ous pro­vi­sions, in­clud­ing set­ting a max­i­mum re­turn on eq­uity of 11.6 per­cent and ap­prov­ing FPL’s use of a fi­nan­cial re­serve. The pe­ti­tion filed Wed­nes­day said the pur­pose of the re­serve was “to pro­vide FPL flex­i­bil­ity to man­age its busi­ness to ad­dress fluc­tu­a­tions in costs and other gen­eral or cycli­cal risks af­fect­ing earn­ings.”

Hur­ri­cane Irma caused mas­sive dam­age across the state in Septem­ber 2017, with FPL say­ing it had about $1.3 bil­lion in storm-restora­tion costs. In late 2017, Congress passed the fed­eral tax over­haul, which, among other things, re­duced cor­po­rate in­come-tax rates from 35 per­cent to 21 per­cent.

Florida util­i­ties have long been al­lowed to pass along storm-restora­tion costs to cus­tomers. Wed­nes­day’s pe­ti­tion said FPL paid its Irma storm-restora­tion costs and made an ac­count­ing en­try to charge off those costs against the re­serve cre­ated in the 2016 set­tle­ment. It then planned to re­plen­ish the re­serve with sav­ings from the tax cuts, the pe­ti­tion said.

But the Of­fice of Pub­lic Coun­sel and the busi­ness groups con­tend that noth­ing in the 2016 set­tle­ment al­lowed the “res­ur­rec­tion” of the re­serve af­ter it was ex­hausted.

They ar­gue that FPL should in­stead be re­quired to pass through the tax sav­ings to cus­tomers on monthly bills, with the pe­ti­tion say­ing the sav­ings could be as much as $736.8 mil­lion. Also, the pe­ti­tion con­tended FPL is ex­ceed­ing the max­i­mum al­lowed re­turn on eq­uity and re­quested that the com­mis­sion “ini­ti­ate a com­pre­hen­sive re­view of FPL’s base rates” and or­der a per­ma­nent rate re­duc­tion based on the tax sav­ings.

FPL’s state­ment Thurs­day, how­ever, ac­cused the Of­fice of Pub­lic Coun­sel of vi­o­lat­ing the rate set­tle­ment and sid­ing with “large cor­po­ra­tions that want to force higher rates on FPL’s res­i­den­tial and small busi­ness cus­tomers. The ap­proved rate agree­ment --- which OPC and the Florida Re­tail Fed­er­a­tion signed on to just two years ago --- ben­e­fits all FPL cus­tomers by en­abling long-term in­vest­ment in clean en­ergy in­fra­struc­ture, hur­ri­cane hard­en­ing, smart tech­nol­ogy and more, while pre­vent­ing the need for gen­eral base rate in­creases through at least 2021.”

“When Hur­ri­cane Irma pum­meled the state in 2017, FPL ex­e­cuted the fastest, most mas­sive restora­tion in U.S. his­tory — an un­prece­dented ef­fort that cost $1.3 bil­lion,” the state­ment said. “Nor­mally, hur­ri­cane costs are passed through to cus­tomers in the form of a rate in­crease, but FPL acted quickly to avoid this by lev­er­ag­ing two years of fed­eral tax sav­ings to cover the cost. Clearly, the com­pany’s fed­eral tax sav­ings di­rectly ben­e­fit­ted cus­tomers, not share­hold­ers.”

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