Florida Utility Regulators Prepare To Raise Energy Bills, Reduce Conservation Measures

Nov 26, 2019 No Comments by

The Florida Public Service Commission will be tested as it is asked to take two votes that could have a significant impact on customer electricity bills in the future: one to set rules for charging customers billions to bury power lines and another to wipe out energy conservation incentives that utilities say are unneeded.

Both decisions could collectively cost customers more than $3 billion in the next three years and are being closely watched — and heavily lobbied — by the utility industry, which expects the regulatory board to take its side.

Environmental groups, the lawyer that represents the public in utility rate cases and two state legislators argue the PSC should reject the industry positions, which also have the support of the PSC’s professional staff, and do more to protect customers from rising bills.

 

“It looks like their entire goal is to make life easy for the utilities,’’ said Sen. José Javier Rodríguez, a Miami Democrat who plans to be at the hearing.

The first issue regulators will decide is a rule that implements a law signed by Gov. Ron DeSantis this year that will allow utility companies such as Florida Power & Light, Duke Energy and Tampa Electric to charge customers so they can bury power lines in order to reduce storm-related outages in the future.

While utilities already have underground power lines in some parts of the state, the new law allows the utility companies to bypass the rigorous rate review that used to happen when they wanted to get money for storm expenses added to their base rates. Now, they will be allowed to instead create a separate charge for the projects, and recover their expenses more quickly. The added charge will also allow companies to profit off burying power lines and other hardening projects.

The PSC must estimate the costs and benefits to utilities and their customers for making the improvements proposed, and then estimate the impact on rates annually in the first three years of the plan. But the question before regulators is how much data should the utilities be required to provide before being allowed to charge customers?

The director of the Office of Public Counsel, J.R. Kelly, who represents the public before the PSC, has asked that utilities be required to file detailed plans for the actual costs of these projects each year to make sure the utilities aren’t overcharging customers.

The PSC staff, however, has rejected that and sided with the utilities, recommending that regulators allow utilities to charge customers an estimated amount. There have been few details about how much the cost of burying power lines will cost Floridians.

In an August earnings presentation, NextEra Energy — parent company of Florida Power & Light, the state’s largest utility, and Gulf Power — told shareholders that FPL expected to spend $3 billion to $4 billion on storm hardening between now and 2022, or 1.6% of the three-year budget, and Gulf Power, based in Pensacola, would spend $100 million to $200 million during that time.

In August, Bank of America utilities analyst Julien Dumoulin-Smith reported in an email obtained by the Herald/Times that NextEra had noted that the legislation related to storm hardening would give the company access to “$25-$35Bn [billion] in capital … over the next 25 years.”

Legislators overwhelmingly supported the measure to allow utilities to make their power distribution system more resilient and recover their costs more quickly. Because utilities profit from capital projects, like building power plants and burying utility lines, the projects guarantee new revenue.

 

“It’s another tool for them to increase rates and make money for their shareholders,’’ said Rep. Anna Eskamani, an Orlando Democrat who voted against giving the utilities the ability to profit from storm hardening projects.

The second issue under consideration Tuesday is whether to end the 30-year program that pays for energy conservation incentives under the Florida Energy Efficiency and Conservation Act (FEECA). The 1980 law requires the PSC to set goals for electric utilities every five years to encourage customers to conserve energy and avoid the need to build new power plants. Florida has the third-highest electric consumption in the nation with an estimated 92% of its electricity coming from burning fossil fuels. The FEECA program allows utilities to offer home energy audits, attic insulation, LED light bulbs, water-heater wraps and home improvement subsidies and pass the costs of the programs to customers.

In 2009, when then-Gov. Charlie Crist made global warming a priority, the PSC proposed robust conservation standards. But in 2014, the utilities sought and the PSC agreed to lower those conservation goals and used a model that made energy conservation appear less appealing for customers. The model was based on costs, not on the net savings produced by lowering energy consumption, and was applied unevenly, often making it difficult for low-income customers and renters to take advantage of the energy efficiency savings.

In the last five years, utilities have successfully persuaded regulators they need to build five new fossil fuel plants. Now, the utilities have proposed — and the PSC staff has agreed — that it is time to end or nearly end all conservation goals. They argue that the measures adopted by the PSC are hard to measure.

The utilities say that if there has been a decline in energy usage, it is not because of the FEECA conservation standards but because of improved federal and state building codes and energy-efficient appliances. The PSC staff and Agriculture Commissioner Nikki Fried, a Democrat, agreed and recommend reducing the conservation goals to near zero for most utilities.

 

“Many of these factors are beyond the utilities’ control and the uncontested evidence in the record supports a continued decrease in the cost-effectiveness of utility-sponsored … measures,’’ wrote the PSC staff in its recommendation.

In a brief filed with the PSC, Fried calls the conservation goal standards outdated and recommends they be abolished. But, when pressed by reporters for suggestions for alternatives to comply with the law, Fried has refrained from proposing anything. Instead, she has called for a study to replace FEECA, and pointed to other states that impose small surcharges on utility bills that fund energy efficiency and conservation programs such as making buildings more energy efficient.

 

“We need to get this right,’’ Fried told reporters. “Bringing everybody to the table with ideas is much more beneficial than me coming up with ideas in my energy office.”

Kelly, the director of the Office of Public Counsel, and some of the environmental groups argue that the measures the PSC uses fail to properly measure the value of the energy efficiency programs.

Eskamani has asked the PSC to adopt minimal goals of 1% conservation and has filed legislation that would require the state to depend on 100% renewable energy by 2050.

 

“If we’re going to pursue a renewable energy portfolio for Florida, energy efficiency is part of that,’’  Eskamani said.

The 1980 act authorizes the PSC “to require each utility to develop plans and implement programs for increasing energy efficiency and conservation.” If the commission zeros out the conservation goals as its staff recommended, it is unclear if the commission will replace them.

The PSC staff notes that “all the FEECA Utilities, including those with zero goals, will continue to offer energy audits as required by FEECA, which will help educate customers about voluntary measures and behavioral changes they can make to reduce their energy consumption.”

Source: Miami Herald

Environment, Utilities

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