State Supreme Court says regulators didn’t adequately justify FPL’s big rate increase

Florida’s highest court on Thursday slapped down the regulatory board that approved the largest utility rate increase in state history for Florida Power & Light, ruling that the Public Service Commission failed to justify why the increase was in the public interest and how it was allowed by law.

The 4-2 ruling leaves in place the rate increases for FPL customers that took effect in January 2022 and that will culminate in $4.86 billion in additional costs to customers by 2026. But it also ordered the PSC to “explain why it reached its conclusions,” a move that could potentially open the door to a reconsideration of part of the settlement agreement that gave the powerful electric utility the ability to automatically raise customers’ bills, while hitting residential clients hardest.

“The Commission’s reasoning about whether all this is in the public interest covers less than two pages of the over 70,000 in the record we have for review,’’ wrote Justice John Couriel in the majority opinion that was joined by Chief Justice Carlos Muñiz and Justices Jorge Labarga and Jamie Grosshans.

Because that record was insufficient for the court to decide if the rate hike was legal, it ordered the commission to “give us something to work with: a decision that is reasoned and articulated enough to allow us to assess on what basis it has concluded that the settlement agreement is in the public interest and results in rates that are fair, just, and reasonable.”

Justices Charles Canady and Renatha Francis wrote dissenting opinions and, while they did not deny that the record was skimpy, they argued that the court did not have the authority to send the issue back to the PSC for a better explanation of its decision. Instead, they said, the court’s role was to either approve or reject the work that was done.

“There is no statutory or constitutional support for us to assume this role of project manager for the commission,” Francis wrote.

PSC was unanimous in granting increase

The five-member PSC unanimously approved the rate increase on Oct. 26, 2021, after spending less than an hour in public discussion. The agreement was the result of a settlement with FPL and seven parties that intervened in the case, including the Florida Office of Public Counsel, the Florida Retail Federation, the Florida Industrial Power Users Group and the Southern Alliance for Clean Energy.

The rate hikes allow FPL to increase rates annually for at least four years as well as receive incremental increases in rates related to the construction of certain solar projects. FPL may also raise rates to cover storm costs without having to seek the approval of regulators and can charge a monthly fee to customers with little to no electricity usage, including solar users — a change that will pay the company $32 million.

The agreement was challenged by Floridians Against Increased Rates, and a coalition of three other organizations — Florida Rising, the Environmental Confederation of Southwest Florida and the League of United Latin American Citizens of Florida. They argued that the settlement was not in the public interest, that parts of it violated state law, and that it would result in unreasonably high electricity rates. Oral arguments before the Supreme Court were held in February.

Bradley Marshall, who represented the consumer advocates in the case, said he was pleased the court agreed with them.

“The court found that when the commission is agreeing to the highest rate increase in U.S. history that they must explain themselves,” he said. “It’s what we’ve been saying since the order came out — that the commission didn’t bother to address any of the issues that were in dispute in the case.”

FPL spokesman Chris McGrath countered that “the record before the PSC in this case is robust and extensive, and provides ample support for the agreement.”

“It’s important to understand that today’s decision by the Supreme Court is procedural in nature and directs the Florida Public Service Commission to make its final order more robust,’’ McGrath said. “The court made it clear that the challenges to the PSC’s legal authority to approve many aspects of the settlement raised in opposition to the agreement provided no basis for reversal.”

The PSC said in a statement that it “appreciates the Supreme Court’s directions and will comply with its request.”

Business customers benefited from settlement

Consumer advocates argued that the evidence showed that that residential customers would have been better off if the commission had approved FPL’s original proposal instead of the settlement that was offered.

For example, one important feature of the settlement requires residential customers to subsidize a $1 billion decrease in costs for the state’s largest commercial and industrial businesses and also subsidize customers who sign up for FPL’s solar expansion.

The PSC held a one-day hearing to review FPL’s rate requests, but its staff asked no questions, and the commission spent little time discussing the issues raised by the consumer groups.

FPL witnesses admitted before regulators that the agreement will cost residential customers disproportionately more than the rate increase imposed on the state’s largest businesses. Those businesses will pay 20% less than what FPL originally proposed, while residential customers see a decrease of only 2%. The PSC never discussed the issue.

The FPL witnesses also admitted that one provision of the agreement allows its Solar Together program, which gives subscribers $2 billion in credits, will not cover any additional low-income customers and instead allow large commercial users to obtain the greatest benefit. That issue also was not discussed by the commission.

The court ruling noted that, under Florida law, the PSC has the “broad legislative grant of authority’” to set “fair, just, and reasonable rates” but only if they are “supported by competent, substantial evidence in the record.”

The court concluded there was no such record and repeatedly chastised the commission for its failure to show how its decision was supported by both law and regulatory authority.

Couriel wrote that the commission and FPL “assure us that the commission’s decision was warranted considering the evidence in the record. But it is not enough to point to the pile of paper memorializing these proceedings and say, ‘It’s in there.’ Instead, the commission must do the job with which the Legislature has tasked it by showing, in its final order, how the paper in that pile supports its decision.”

Why didn’t PSC ask questions?

The ruling also noted that the PSC has the discretion to use “non-statutory” reasons for justifying its decisions, but also raised questions about why regulators embraced FPL’s arguments without challenging them.

For example, the court wrote, the PSC “supported its decision by stating that ‘FPL’s residential 1,000 kWh bill [is] projected to remain 21% below the current national average’ under the settlement agreement” but suggested the commission would have to “explain the relevance of this metric in light of ‘the purpose of the Commission.’ ”

The consumer advocates argued that the PSC also unfairly attempted to help the company expand profits for its shareholders by giving FPL a midpoint return on equity of 10.6%, higher than it allowed for other electric utilities in Florida, allowing the company to reap profits from expanding a power plant, transmission line or distribution network, as well as solar projects and electric vehicle charging stations.

Marshall said he hopes the PSC will invite Florida consumers to testify about the impact of the rate increases on their lives.

“This settlement included a lot of overbuilding that Floridians can’t afford” and do not need, he said. “Floridians are struggling to pay their power bills, and I hope the commission considers this in context.”

Justice Meredith Sasso, who joined the court in May after oral arguments in the case, did not take part in Thursday’s decision.

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