Regulators to decide if FPL’s home customers should pay more so businesses can save

Should Florida Power & Light residential customers pay more over the next four years so that commercial and industrial customers pay less?

That is one of the pivotal questions before the state’s Public Service Commission on Monday as regulators conduct what is expected to be a two-day hearing on a proposed settlement that would increase FPL rates by $1.53 billion through 2025.

Proponents, including the Office of Public Counsel which represents residential and commercial customers, say it’s a good deal because the company will make unprecedented investments in solar expansion and electric vehicle charging capacity.

But to opponents, which include a coalition of organizations representing low-income and minority customers, and environmental advocates, the settlement leaves residential ratepayers “worse off than FPL’s original request” of $6.2 billion over four years because they are subsidizing commercial and industrial users, who will see lower increases.

“This settlement agreement extracts so much wealth from residential customers and small businesses and hands that to just a few large commercial and industrial customers that it cannot possibly be in the public interest,’’ said Bradley Marshall, attorney for Earthjustice, Florida Rising, League of United Latin American Citizens and the Environmental Confederation of Southwest Florida, which all oppose the settlement

Also opposing the settlement are other parties not included in settlement negotiations, including a Palm Beach County couple that has joined as intervenors in the case, and a group called Floridians Against Increased Rates (FAIR), a consumer group led by a former Jacksonville utility executive.

They argue that FPL’s transmission and distribution system is overbuilt and, instead of charging customers more, the company should reduce rates.

They say the settlement wasn’t needed to obtain solar investments because the company would have been made them, anyway, and they view the settlement as guaranteeing FPL excessive profits. With a 10.6% return on investment, FPL would have one of the highest guaranteed ROEs in the nation.

“It’s contrary to the public interest because it would require customers to pay far more than what FPL needs to do its job for fair, just and lowest possible cost,’’ said Scheff Wright, attorney for FAIR, a Jacksonville-based consumer group that FPL says should not be allowed to be a party to the case. “In 2023, the excess revenues are more than $3 billion over the four-year period. Our purpose is to save FPL’s customer those amounts.”

FPL says rate increase is needed

FPL has defended the settlement as “a big win for all 5.6 million FPL customers” and defended the investments as necessary to ensure service is reliable in the face of hurricanes and climate change.

“This agreement paves the way for FPL to continue delivering America’s best energy value — electricity that’s not just clean and reliable but also affordable,’’ FPL CEO Eric Silagy said in a statement.

President and CEO of Florida Power & Light Eric Silagy
President and CEO of Florida Power & Light Eric Silagy

The settlement agreement was announced Aug. 10 between FPL and the Florida Office of Public Counsel, which represents consumers in rate cases, the Florida Retail Federation, the Florida Industrial Power Users Group and the Southern Alliance for Clean Energy. Vote Solar and CLEO Institute signed on later after some of their requests were met.

Richard Gentry, who took over as head of the Office of Public Counsel earlier this year, surprised many when he did an about-face and signed onto the $1.53 billion settlement. In pre-hearing proceedings, the OPC argued that the rate increase should be rejected and FPL should lower its rates by $70 million.

“We are mindful of the fact that residential has to pay a little more, there’s no question about that,’’ Gentry said Thursday. “And I’m sure that the commission will look at that closely. But under the circumstances where we represent all ratepayers. It’s kind of hard to argue that we were going to favor one over the other.”

He said his office worked to get FPL to agree to double its solar investment and back off its request to get an additional return on investment “as a bonus” under certain circumstances.

Under the agreement, FPL would devote about $200 million for electric vehicle chargers and about $2 billion in additional solar expansion through its program called SolarTogether, a program that allows customers to voluntarily pay more on their electric bills to finance the solar projects and in return receive credits that are expected to result in them getting a “payback” in about seven years. The agreement dedicates 40% of the solar expansion to residential and small business customers and 60% to commercial, industrial and governmental customers.

“What we came out with, and what they said that they needed to fund [operations] is probably fair,’’ Gentry said. “They still have some of the lowest rates in the nation, and they are still building more, not only solar, but also electric car vehicle charging stations than anybody in the state. So, we think all in all, what we wound up doing was invest in the future.”

Katie Chiles Ottenweller, Vote Solar lawyer and Southwest director, said her organization supported the settlement to get both additional solar capacity and an agreement from FPL to double the number of days when customers are protected from shutoffs during extreme weather.

“We are taking the position that the settlement agreement taken as a whole is in the public interest,’’ she said. “That involves swallowing some things we clearly did not support but, given the level of investments in solar power, the transition to electrification, and the concessions we were able to get around the safety net and resilience, we are starting to turn a corner with FPL.”

FPL agreed to refrain from shutting off power to non-paying customers if temperatures are above 95 degrees and add protections against freezing temperatures and hurricane-related outages. The company also committed to investing $5 million to implement a new pilot program to deploy electric school buses, solar panels and battery storage at public schools that serve as emergency shelters for low-income communities, in addition to exploring federal and state funding.

If approved by the PSC, the agreement will increase the base rate of a typical monthly residential bill for a customer who uses 1,000 kilowatt hours of electricity by $13.64 over four years. The biggest hike would come next year when a $6.08 a month increase would occur for the typical residential bill using 1,000 kWh. Those customers would see another $3.85 increase in 2023, another increase of $2.21 in 2024, and a final bill increase of $1.50 in 2025.

Marshall will present a witness who will testify, however, under the settlement agreement, residential customers will pay $253.7 million more than they are currently paying, while large commercial and industrial users (known as general service demand and general service large demand customers) will pay $265 million less.

FPL avoids closer public scrutiny

The PSC will conduct an abbreviated hearing on the proposed rate increase on Monday, followed by a review of the proposed settlement. A final vote on the settlement would take place on Oct. 26.

Under the deal, the company could start collecting $692 million more in base rate increases beginning in January, followed by $560 million in 2023, as well as additional rate hikes of $280 million to pay for solar installations through 2025.

This is the third time in nearly 12 years that FPL could avoid a protracted rate case and sidesteps having its expenses — from decisions involving when it shuts off utility customers to how much it compensates its executives — getting thoroughly scrutinized by regulators in a public forum.

State law requires that in a rate case, the utility and interested parties, provide testimony and question witnesses about their recommendations on issues in the case..

The settlement also means that the five-member PSC, which includes two members with a year or less experience, will not conduct a full electric utility rate case for the largest utility in the state. Commissioners are paid $136,000 a year.

Mary Ellen Klas can be reached at meklas@miamiherald.com