As Florida Power & Light prepares to ask state regulators for the largest rate increase in state history — expecting its customers to pay at least $6.2 billion more over four years — a mysterious adversary has emerged.
Floridians Against Increased Rates was organized in March, shortly after FPL filed its request to raise rates before the Public Service Commission, the state agency that regulates utility rates. The case is scheduled to commence in August, unless the parties reach a settlement that appeases everyone, and, if approved, customer bills will increase starting in January.
Rate cases cost money to finance, and the new group has hired a veteran utilities lawyer to handle its case. It has assembled a stable of experts that include a former PSC commissioner and adviser to governors, a former PSC staff director, a prominent Jacksonville community leader and retired lobbyist and a well-regarded Tampa accountant who advises Republican political committees.
Their goal is to convince the PSC that FPL’s profits already exceed what is allowed by law and that instead of the rate increase, the PSC should approve an immediate reduction in rates.
Who is paying for this ostentatious challenge to one of the state’s most powerful corporations? They won’t say, shielded by federal tax laws, which give them nonprofit status. But they claim to have more than 500 members who joined through Facebook and word of mouth.
“We don’t have to disclose who our donors are,’’ said Michael Hightower, a former chief lobbyist and longtime board member for Jacksonville Electric Authority, who helped form the group, which is registered with the IRS as a 501c4.
JEA ended a failed and secretive attempt to sell the public utility in 2020 when FPL was one of the suitors. Hightower and several other civic leaders formed a nonprofit last year called “Our Jax” with the goal of holding Jacksonville city leaders accountable and to promote better transparency. Now he said FAIR hopes to add its voice to the roster of parties opposing the rate increase before the PSC.
“They shouldn’t be asking for a rate increase at a time when some people have lost everything in this pandemic,’’ Hightower said. “There is no need for it. It hurts the homeowner, and if the homeowner is a small business owner, it hurts them twice.”
Also opposing FPL’s request are AARP, Earthjustice, Environmental Confederation of Southwest Florida, the Southern Alliance for Clean Energy, Florida Consumer Action Network, Vote Solar, the Florida Industrial Power Users Group and the Florida Retail Federation.
Rates would rise $1 billion first year
FPL’s argument for the case has focused on the fact that the company delivers to customers “exceptional value” and should be granted a rate increase because “continued investments are necessary to maintain the strong value proposition that customers expect today as well as in the future.”
The rate hike would phase in over four years, beginning with a $1.1 billion increase on Jan. 1, 2022, and followed by a $607 million increase in January 2023 and two more increases to pay for solar expansion in 2024 and 2025, estimated at $140 million each. The cumulative increase over the four years is projected to be between $6.2 billion and $6.5 billion.
According to Dave Reuter, FPL’s chief communications officer in an op-ed in the Miami Herald, the rate increase will allow the company “to continue making smart investments as we work to build a more resilient and sustainable energy future that all of us can depend on, including future generations.”
But FAIR argues that FPL is “overcharging customers by more than $1 billion annually.”
Representing FAIR are Tom Herndon, a former member of the PSC and one-time chief of staff to former Govs. Lawton Chiles and Bob Graham, former PSC executive director Tim Devlin, and Nancy H. Watkins, a Tampa-based certified public accountant and longtime adviser to Republican candidates.
FAIR’s attorney is Scheff Wright, who long represented the Florida Retail Federation, which has a history of opposing utility rate cases.
Herndon said he got involved after looking over the documents filed in the case and concluding that FPL’s bond rating and financial track record “in the last few years is very positive from the standpoint of the company’s earnings, so you kind of have to wonder why do they need $6 billion over the course of four years? From the standpoint of the ratepayers, or the customer, it just didn’t seem like a fair request,’’ he said. He said FAIR hopes to persuade the PSC to deny all or part of the request.
Seeking rate decrease
Devlin, a 35-year veteran of the PSC, resigned as PSC executive director in 2011 at the request of current commissioner Art Graham when Graham become PSC chairman.
Devlin’s departure came just months before FPL planned to submit a rate increase request and months after Devlin asked the state’s utility companies to report how many former PSC employees they had hired and how much they were paying them. The goal was to determine whether there was an indirect cost to customers when utilities are able to buy access and insight into regulators. The utilities successfully fended off the request and hadn’t reported the information before Devlin was ousted.
Devlin will represent FAIR as an expert on utility accounting issues and regulatory policy. According to testimony filed in the case, Devlin argues that if the PSC were to approve FPL’s proposal as requested, it “would be giving away hundreds of millions of dollars of depreciation value created and paid for by FPL’s customers to FPL’s sole shareholder, NextEra Energy, Inc. The result would be rates that are unfair, unjust and unreasonable, and contrary to the public interest.”
FPL has challenged FAIR’s standing in the case, claiming the group doesn’t belong in the room as the utility giant presents its case before state regulators. FAIR replied with a roster with names and addresses of its members, and proof that 80% of them are FPL customers who have a right to demand fair rates.
FPL predicts growth
In his letter to regulators seeking the rate increase, FPL President and CEO Eric Silagy argued that the company expects “to add approximately 498,000 customers from 2018 through 2025” and needs to charge current customers more “to meet the needs of these additional customers in building out infrastructure, including poles, wires, transformers and other components.”
He said “significant investment” is necessary “to meet compliance obligations and maintain or improve day-to-day reliability for customers.”
Silagy also noted that the company has “taken extraordinary steps to help mitigate the economic effects of the pandemic on particular groups of customers including the implementation of specific relief programs for low income and small business customers” and argued that FPL’s typical customer bills would be “significantly below the national average” and with the consolidation of the former Gulf Power Company, which FPL purchased, “a typical residential customer in Northwest Florida in fact will see a bill decrease compared to today’s bill.”
FPL wants regulators to allow it to earn an 11.5% return per year on its investments, something FAIR’s Herndon says is “excessive vs. the national average for vertically integrated electric utilities of 9.55%.”
For the past three years, documents show that FPL has consistently earned the maximum of its authorized earnings range of 11.6%, and Herndon argues in his written testimony that as a result the PSC should reduce FPL’s revenue requirement for 2022 by more than $1 billion.
“This means that in 2022, FPL could cover all of its labor, materials and supplies, and other O&M [operation and maintenance] costs, cover all of its borrowing (interest) costs, and make all of its proposed investments, and still earn returns demonstrated by national experience to be fair and reasonable, with no rate increase at all!’’ he wrote.
Before launching FAIR, the organizers formed another nonprofit, Citizens for Lower Electric Rates, in September 2020. As president of that organization, Hightower wrote a public letter to Silagy in March, equating the rate request to a tax increase and urging him to abandon the idea.
“We fail to see the urgency of FPL’s planned rate hike request, since FPL maintains a strong balance sheet, consistently maintains profits that are effectively guaranteed and much higher than other U.S. utilities earn, and since FPL was the only regulated electric utility in Florida that did not pass its windfall from recent federal corporate tax breaks — $772.3 million per year, according to the Public Service Commission staff — on to its customers,’’ Hightower wrote to Silagy. “The idea that FPL shareholders need the money more than those who would be forced to pay it is indefensible.”
PSC record favors FPL
The five-member PSC is appointed by the governor and confirmed by the GOP-controlled Legislature. For more than a decade, neither the Legislature nor the governor has challenged FPL’s legislative and policy agenda. Others who have, have been punished.
In January, for example, J.R. Kelly, the lawyer who represented consumers in utility cases before the PSC and successfully challenged several FPL initiatives in court, retired rather than face another attempt by legislators to oust him. Kelly headed the Office of Public Counsel, which is funded by the Legislature.
The last time FPL was denied a rate increase by the PSC was in 2010, when it sought a $1 billion increase on the heels of the Great Recession. The decision set off a flurry of action by the Legislature, which then replaced four of the five commissioners with more utility-friendly regulators. In 2012, the new regulators granted FPL’s request to raise base rates by $358 million, plus additional increases when two new plants went online.
Between 2012 and 2017, the PSC sided with FPL in every major case, prompting Kelly to challenge some decisions in court. In 2016, for example, the Florida Supreme Court rejected the PSC decision to allow FPL to use customer dollars to invest in an Oklahoma-based fracking company.
Mary Ellen Klas can be reached at firstname.lastname@example.org and @MaryEllenKlas