Florida electric utilities keep top salaries top secret – link to original article

 

Two electric companies won’t disclose their executive pay packages, saying it’s not the public’s business.

 

Miami Herald – 8/11/09

 

BY MARY ELLEN KLAS

HERALD/TIMES TALLAHASSEE BUREAU

 

TALLAHASSEE — In their bids to get electric rates increased next year, two of the state’s top electric companies said Monday that it’s not in the public’s interest for them to disclose how much they pay their top executives, according to documents filed with state utility regulators.

 

Florida Power & Light and Progress Energy argue that disclosing how much they pay their executives in salaries, stock and bonuses is not necessary for the Public Service Commission to determine whether to allow it to raise rates by as much as 31 percent starting next year.

 

But PSC staff argues otherwise, noting that the salary data is essential to the regulators’ ability to “evaluate the appropriateness of the employee compensation to be included in the rate base.”

 

FPL wants permission to increase its base rates by $12.40 a month starting Jan. 1, a 31 percent increase in the base rate. FPL estimates that lower fuel costs will offset the rate hike so that customer bills will decline in the short term.

 

But state regulators say they want to know how much the companies are paying their top employees to determine whether customers are picking up too much of the tab.

 

Commissioner Nancy Argenziano asked the staff to find out how many employees at the companies get paid more than $165,000 a year. In a letter last week to PSC Chairman Matthew Carter, Argenziano said it was the obligation of regulators to make sure that the “piggishness” of Wall Street wasn’t reflected in Florida.

 

“More baldly: they don’t care as long as the rate payer picks up the tab,” she wrote. “Thus, the PSC is the only policeman on the block.”

 

The PSC will determine on Aug. 18 whether to force FPL and Progress Energy, as well as the state’s other investor-owned utility companies, to report their executive compensation. In its motion filed Monday, FPL attorney Barry Richard argued that if they disclose how much they pay their top executives, including bonuses and benefits, they will hurt employee morale, drive up compensation costs and open the door to competitors poaching employees.

 

The companies have supplied the PSC with part of its request but they left out names of the employees attached to the salaries and asked the information remain confidential.

 

Argenziano countered, however, that if the PSC isn’t given the names, it can’t ensure that the companies aren’t compensating employees because of their personal relationships with executives.

 

Meanwhile on Monday, Florida Public Counsel J.R. Kelly filed a motion that argues that Progress Energy should be stopped from getting its $500 million rate increase and instead be ordered to lower its rates $35 million. He says the St. Petersburg-based electric company has been making hefty profits by accumulating $850 million in excessive depreciation and it should be returned to rate payers.

 

Kelly made similar arguments in opposition to FPL’s rate case. He argued that FPL should decrease its rates by $364 million in 2010 instead of raising them $1.3 billion. The FPL request would mean that base rates for the average customer would increase $12.40 a month starting Jan. 1. FPL estimates lower fuel costs will offset the hike.

 

The commission will begin hearings on FPL’s request on Aug. 24 and rule by mid-November.

 

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

FPL rate hike request generates criticism – link to original article

 

Miami Herald 8/16/09

 

BY MARY ELLEN KLAS

HERALD/TIMES TALLAHASSEE BUREAU

 

TALLAHASSEE — The state’s largest electric companies say it’s time to raise your rates.

 

After nearly 25 years without increasing basic rates for electricity, Florida Power & Light and Progress Energy have asked state regulators to charge customers about 30 percent more beginning in January. That’s a $9.71 rate hike for 1000 kilowatt hours per month for FPL customers in 2010 and about $12.40 in 2011. And it’s a $13.83 per month increase for Progress customers.

 

The companies say the existing system is maxed out and demand is growing. They want to expand, repair and construct generating plants — which will take years, and cash — so they want to start collecting money now.

 

“We are not insensitive to the impact of price on our customers,” said Jeff Lyash, president of Progress Energy. But the rate increase is needed, he said, because the company has run out of capacity in the existing system and costs have gone up for clean air regulations, greenhouse gas legislation and inflation.

 

But to public advocates, the attorney general, and the state’s largest commercial users of electricity, electric bills have gone up and asking consumers to pony up more money in the worst economy in a century is bad business and terrible timing. They want rates reduced instead.

 

“We don’t think that’s fair and reasonable, especially in today’s economic times,” said J.R. Kelly, the state’s public counsel whose office represents customers before the Public Service Commission. The PSC regulates utilities.

 

In hearings that begin Tuesday, opponents will argue that these regulated monopolies accumulated sturdy profits, paid their executives substantial salaries and captured millions of dollars more by extending the life of their existing power plants — at the same time they’ve been charging customers more.

 

As a result, Kelly is asking Juno Beach-based FPL to cut its rate request from a $1.3 billion annual increase to a $364 million annual decrease. He is also asking St. Petersburg-based Progress Energy to replace its requested $500 million increase with a $35 million annual drop in rates.

 

SOFTENING THE BLOW

 

FPL proposes to soften the hit of its $1.3 billion rate increase by breaking it into two parts: $1 billion kicking in on Jan. 1, 2010 and the remaining $300 million on Jan. 1, 2011. It also predicts that drops in fuel costs, which have been declining in the past year, would offset the increase, softening the impact on electric customers.

 

FPL estimates an average bill will decrease slightly in the first year.

 

“While we of course understand the difficult economy, it’s important to remember that customer bills are going to go down in 2010 and we have a responsibility to invest in the electrical infrastructure for the future,” said Mark Bubriski, FPL spokesman.

 

The problem, opponents say, is that the PSC has allowed the utilities to pass on the cost of their expenses directly to customers with a host of add-on charges that used to be included in the base rate.

 

Regulators approved these add-on charges without requiring the power companies to go through the intense scrutiny of a rate case, the process that requires them to justify every expense and every charge.

 

RISING ADD-ONS

 

Add-on charges now account for 58 percent of every FPL bill and include the cost of complying with environmental regulations and conservation, fuel, hurricane repairs and, most recently, financing nuclear power plants.

 

In October 1985, FPL was charging $48 per month for 1,000 kilowatt hours for its base rate and $35 for add-ons. This year, the base rate is $42 and add-ons are $65, or $24 a month more than they were 24 year ago.

 

“What matters is the total bill,” said Charlie Beck, deputy public counsel.

 

The utility companies say they don’t have any control over the pass-through costs and they shouldn’t have to hold an elaborate rate hearing every time fuel costs change. They also say they don’t make a profit on the add-on fees.

 

Hearings to determine the rates will begin Aug. 24 for FPL and Sept. 1 for Progress. Regulators will determine the new rates by December.

 

At the hearings, commissioners will sort through how much profit the companies should be allowed to earn, how much money they should be able to keep from accounting loopholes that allow them to charge consumers for depreciating assets, and how much in salary and bonuses the companies should be allowed to award their top executives.

 

COMPENSATION ISSUE

 

The issue of executive compensation will come to a head at a separate hearing Tuesday, when the PSC staff faces off with lawyers from both FPL and Progress.

 

The PSC wants to ask the companies to justify the compensation in light of the proposed rate increase.

 

The companies argue that making the documents public will reveal trade secrets to competitors.

 

One likely flash point: An expert witness hired by the public counsel found that half of the money FPL set aside as incentive bonuses for its top officers is based on the company’s stock earnings and customers should not have to pay for that.

 

The PSC has already ruled on a similar rate increase request by Tampa Electric Company. TECO sought a $228.2 million annual rate increase; the public counsel and attorney general recommended a $38.6 million rate reduction. The PSC staff recommendation found middle ground, recommending a $76.7 million rate increase — but the PSC approved a $104.3 million increase.

 

Opponents of the FPL and Progress rate increases worry that the TECO case may be a sign that the five-member commission appointed by Gov. Charlie Crist may not side with them.

 

“I’m concerned that there are not as many pro-consumer commissioners on that commission as there need to be,” said Rick McAllister, CEO of the Florida Retail Federation which seeks a rate reduction.

 

“It’s the Public Service Commission, not the power service commission.”

 

FUEL COSTS

 

FPL’s plan to use lower fuel costs to offset its rate increases troubles opponents, who argue the money should be returned to customers this year when fuel prices have dropped and, they say, the fuel costs could rise by 2011.

 

FPL spokesperson Mark Bubriski acknowledged there’s no guarantee fuel charges will decline after 2010, but he noted that FPL has saved customers $3 billion in fuel costs since 2003 alone. He said that FPL customers now pay about $25 less per month than customers of other Florida utilities.

 

Beck, of the public counsel’s office, argues that if FPL were not asking for a rate increase, the lower fuel costs next year would guarantee a drop in customer bills. He argues that FPL should lower its base rate by $4.50 per month for 1,000 kilowatt hours and use its existing profits to finance its growth and expansion.

 

In addition to executive compensation, the PSC will decide return on equity and depreciation costs.

 

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

FPL Group profits jump 77 percent – link to original article

 

Miami Herald – 07/29/08

 

FPL Group reported a 77 percent increase in profits as its request for a rate increase continues before state regulators.

 

BY JOHN DORSCHNER

JDORSCHNER@MIAMIHERALD.COM

 

While Florida Power & Light seeks a billion-dollar increase in its basic rates, its parent company, FPL Group, reported a 77 percent increase in quarterly earnings Tuesday, driven partly by market hedges on energy contracts.

 

The utility reported a small decline in profit, caused by more empty homes due to foreclosure and lower customer usage as people tightened their belts during the recession. But that decline was more than compensated for by a good showing of the company’s unregulated energy division.

 

Altogether, the energy giant earned a profit of $370 million, or 91 cents a share, compared with $209 million, or 52 cents a share, for the same period last year. Removing unusual one-time items, FPL Group executives said, earnings were $401 million for the quarter, up from $375 million last year.

 

NextEra Energy Resources, the unregulated arm that operates throughout the country, saw net income increase by $183 million, while Florida Power & Light’s decreased by $4 million, to $213 million.

 

Sales of electricity dropped 2.8 percent compared with last year. About 313,000 homes appeared to be empty, according to FPL meters — an increase of 68,000 since the end of 2007. For the quarter, the average number of customers dropped by 16,000.

 

On Monday, the day before the earnings release, David E. Parker, an energy analyst with Robert W. Baird & Co., maintained an a outperform rating on FPL Group because FPL’s “regulatory environment is constructive,” meaning the utility enjoys a good relationship with state regulators and is not likely to be hurt financially by their actions.

 

The Public Service Commission is in the midst of a lengthy rate case, scheduled to end with a decision next fall. Its findings are based upon the performance and needs of the utility and not the unregulated activities of NextEra.

 

The utility is seeking a 30 percent increase in its base rate — from $39 to $51 a month for the average customer. Altogether, it’s seeking an additional $1 billion from its 4.5 million customers in 2010 and $247 million more in 2011.

 

The utility maintains it needs the rate increase to improve its infrastructure and to give its investors a competitive rate of return of 12.5 percent.

 

Even with a rate hike, FPL maintains customers are likely to see a decrease in their bills between December 2009 and January 2010, because of lower fuel costs. A resident using 1,000 kilowatt hours a month could see a $5 drop in his bill, the utility says.

 

With the rate change, the customer using 1,000 kWh will pay $51.71 for the base rate, $37.09 for fuel, $15.83 for other, for a total bill of $104.63, according to FPL calculations.

 

In filings with the PSC, consumer groups argue those numbers are misleading, because fuel costs fluctuate annually while the base rate is a constant.

 

The Office of the Public Counsel, the state agency that officially represents consumers, has told the PSC that FPL’s base rates should be lowered by $360 million next year.

 

The South Florida Hospital and Healthcare Association has submitted at least five boxes of testimony and evidence to support its statements that FPL is asking for far too much.

 

The city of Sunrise “vehemently objects” to the rate increase, and the city of South Daytona has argued that FPL’s entire case is improper and should be dropped.

 

The Florida Association For Fairness In Rate Making — a coalition of 500 fast-food restaurants, including Waffle House, Wendy’s, Arby’s, Pizza Hut, Kentucky Fried Chicken, Taco Bell, Long John Silver’s and A&W — has filed objections with the PSC, concerned that rate increases could damage its franchise restaurants.

 

However, a major lobbying group, Associated Industries of Florida, has come out in support of FPL’s request, saying “FPL’s proposal will make Florida’s infrastructure stronger, more storm resistant, smarter, better controlled, more reliable, more fuel efficient and more environmentally friendly.”

 

During a teleconference with analysts Tuesday, FPL President Armando Olivera said the utility was confident of getting a favorable decision.

 

`We frankly have a very strong case,” he said.

 

On Tuesday, the stock closed at $57.09, down $2.95 for the day. Since FPL Group hit a low of $33.81 last October, the stock has been steadily climbing.

 

FPL bills might dip $9 in ‘10 – link to original article

 

FPL, seeking an increase in its base rate from PSC, says customers would see a drop in their overall monthly bills in 2010 because of declining energy costs.

 

Miami Herald – 8/21/09

 

BY JOHN DORSCHNER

JDORSCHNER@MIAMIHERALD.COM

Florida Power & Light customers are likely to see their monthly bills drop by an additional $4 a month next year because of the continuing decline in fuel prices.

 

The utility had said earlier that it expected fuel charges to drop by $5 next year, but on Thursday it filed papers with the Public Service Commission that it’s anticipating overcharges in fuel during 2009, which would mean an additional decline of $4 — for a total savings of about $9 a month for the customer using 1,000 kilowatt hours.

 

By state law, energy charges are simply passed through to customers. FPL takes no profit or loss on them. They fluctuate as the utility’s fuel charges fluctuate.

 

The utility is in the midst of hearings before the Public Service Commission to seek a 31 percent increase in its base rates, which would add about $12 a month to the bill of the customer using 1,000 kilowatt-hours a month.

 

Because of the reduced fuel charges, FPL said Thursday that even with a rate increase the typical customer bill can be expected to decline from $109 in December to $100 in January 2010, with PSC approval.

 

Consumer advocates have been quick to point out that energy charges can fluctuate from year to year, while base rate changes remain constant.

FPL’s base rate is lower now than in 1985 – link to original letter to the Miami Herald

 

Miami Herald – August 21, 2009

 

The Aug. 17 article FPL rate hike request generates criticism says that the Public Service Commission (PSC) has “allowed the utilities to pass on the cost of their expenses directly to customers with a host of add-on charges that used to be included in the base rate.”

 

Let’s compare the 2009 charges to 1985, the last time we were granted a general base rate increase. Excluding fuel and taxes, our base rate and all other additional charges on a typical 1,000 kilowatt-hour residential customer bill totaled $56.11 in 1985. The same bill in 2009 totals $54.36. That’s a reduction of $1.75, not an increase. While additional charges have been approved over the years for items such as energy conservation and storm restoration, these are more than offset by the elimination of other charges that existed in 1985 and by a reduction in the base rate. In fact, our base rates are 17 percent lower than they were in 1985. In 1985, fuel accounted for $25.99 on the typical 1,000 kilowatt-hour residential customer bill. In 2009, it accounts for $52.23. FPL does not profit on the cost of fuel used to generate electricity, and we have invested in fuel-efficiency measures to keep it as low as possible for our customers. Our investments in making power plants more efficient have reduced fuel costs by almost $3 billion since 2002. If fuel prices increase in the future, the customer savings associated with these fuel-efficiency investments will be even greater.

It’s precisely because fuel charges could go up again that we are seeking base-rate adjustments that will allow us to continue to achieve greater fuel efficiency.

The article quotes Charlie Beck, deputy public counsel in the Office of Public Counsel, as saying, “What matters is the total bill.”

We agree. Here’s the bottom line: If the state’s Public Service Commission agrees with FPL’s request, the typical residential customer bill, already the lowest of all of Florida’s 54 utilities, will go down by at least $5 monthly starting in January 2010 as a result of lower fuel prices and the impact of fuel efficiencies we have achieved.

Tim Fitzpatrick, vice president, corporate communication, FPL, Juno Beach

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