Electric companies eye increases, foreshadowing dark time for Florida consumers | Commentary

Two major Florida electric companies are asking regulators to sign off on substantial rate increases that would affect about three million customers, drawing objections from consumer advocates and watchdogs who believe those hikes are based on unneeded spending sprees, place too much of a burden on poor people, and are flat-out unfair for two companies that already charge among the highest residential rates in the nation.

The proposed increases from Duke Energy and Tampa Electric — two investor-owned utilities that service areas in Central Florida and along the state's west coast — are remarkable in their own right. But the possible rate hikes also foreshadow a more costly future ahead for millions of other residents who are serviced by Florida Power & Light, the state's largest utility, which is expected to ask for higher rates next year.

In short, thanks to an informal arms race among the state's private utilities, and a historically docile Public Service Commission, the majority of Floridians can expect to pay higher rates in the near future. The Duke and Tampa Electric proposals are a bit of a test case — how much of what the companies want will the Florida Public Service Commission be willing to grant, even in the face of compelling opposition? What will they get away with?

In 2021, FPL secured a three-year settlement that entitled it to the largest electric rate increase in Florida history, although one that still remains tied up in the Florida Supreme Court. Part of that settlement established that FPL had the right to collect a return on equity (a profit margin) that effectively amounted to 11.8 percent, far higher than the national average and above what the Public Service Commission had established for Duke and Tampa Electric in their own rate hearings — a fact utility critics noted in court documents when arguing FPL's increase was grossly excessive.

Now, Duke and Tampa Electric are asking for permission to collect profit margins that are much closer to FPL's current return on equity. Tampa Electric wants an 11.5 percent return and Duke has asked for an 11.15 percent return, according to PSC documents. In real terms, those increases would amount to hundreds of millions of dollars in extra revenue from 2025 through 2027: For Tampa Electric, that would be $296 million in additional revenue in 2025, $100 million in 2026 and $71 million more in 2027; for Duke, that would be $593 million, $98 million and $129 million, respectively.

"Our decision to request a rate increase was not an easy one. We know rising prices due to inflation continue to affect businesses and families everywhere," a Tampa Electric representative said during a PSC hearing last month.

"Tampa Electric has been impacted by higher than expected inflation, labor market challenges, supply chain disruptions and rising interest rates."

The Office of Public Counsel, which represents customers before the Public Service Commission, argued the companies' proposals are far in excess of what they actually need to keep the lights on. Rather than returns in the 11 and 12 percent range, OPC is pushing regulators to keep their profits closer to 9.5 percent or less — which is in line with the national average and what Duke and Tampa Electric's own affiliates collect in other states and in Canada.

That is also good reason to believe, as some consumer groups do, that FPL is wildly overcharging customers even with its current rates.

For customers, the Public Service Commission process can be impenetrable, confusing and intimidating: These rate cases look and sound like court proceedings, complete with voluminous, highly technical filings in a public docket that is neither easy nor intuitive to navigate. For the few residents who do attend, they'll hear the PSC chair say any comments they make could be "subject to cross-examination."

There are good reasons for some of the formalized ways things are done, but on balance, the opacity of the process is a problem given that the PSC, a group of political appointees chosen by the governor, has acquiesced so often to the utility industry's demands it's been called a "captured agency" by one of Florida's leading government watchdogs. Credit-rating agencies, using a euphemism better preferred by the industry, call Florida a "constructive" regulatory environment.

The nature of the utility business and how billing works also create a lot of room for obfuscation. That's how, for example, customers might hear that their bills could go down even as a utility is asking for a rate increase. A decrease in the price of fuel, for example, which is a cost the utilities can't profit from, or the expiration of a storm-recovery charge, can offset the increase in a fixed part of a customer's bill, creating at least a temporary drop. But were fuel prices to rise, or a new recovery charge to be levied, that higher fixed rate will lead to increased pain — in the long run, that temporary drop will prove illusory.

This time, the Office of Public Counsel, led by Walt Trierweiler, has pushed back forcefully against Duke and Tampa Electric's proposals, starkly different than how the office treated FPL during the 2021 settlement talks. Then, OPC was led by a former lobbyist who'd taken over after a longtime consumer advocate was muscled out of the office by then-Senate President Wilton Simpson, an FPL ally. The result was the 2021 settlement, which critics contend amounted to an appalling cash cow for FPL. That former lobbyist, Richard Gentry, left OPC not long after striking that deal and is today running for a state House seat in Central Florida with a campaign backed by big business.

A strong OPC is a critical check on Florida's private utilities. Should that remain, it would pose a markedly different challenge for FPL than the last time it nabbed a rate increase. This much is certain: Florida's largest electric company is closely watching what unfolds for Duke and Tampa Electric.

Nate Monroe is a Florida columnist for the USA Today Network. Follow him on Twitter @NateMonroeTU. Email him at nmonroe@gannett.com.

This article originally appeared on Florida Times-Union: Bigger bills loom for FPL, Duke Energy and Tampa Electric customers