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Former utility regulator defends FPL’s $1.2 billion rate hike request

by Dara Kam | October 23rd, 2009

UPDATE: Read the story from The Palm Beach Post on here

The last day of Florida Power & Light Co.’s proposed $1.2 billion rate hike hearing is winding down late as its final expert gets grilled over the biggest sources of contention in the case – depreciation and how much profit the company should be allowed.

FPL consultant Terry Deason, who served 16 years on the Public Service Commission, spent hours answering questions about an agreement he was part of in 2002 that, opponents say, wound up costing costing customers at least $1.25 billion than it should have.

FPL is paying Deason, a registered lobbyist who represents four of the state’s investor-owned utilities including FPL, $400 per hour to testify and $295 per hour for his advice.

Deason was a commissioner when the PSC agreed to allow FPL to collect $125 million a year from customers for depreciation expenses.

Since then, FPL’s own study found the company has collected at least $1.25 billion more than it should have.

The state’s consumer advocate believes that amount should be $2.7 billion.

The PSC signed off on the agreement at the time, Deason said, because it was unknown if Florida would deregulate utilities.

That never happened, but the 2002 agreement and another in 2005 set the depreciation rates in stone and deviated from normal accounting practices which would have spread out the costs over the lifetime of the equipment.

That’s what the Juno Beach-based company wants to do now, over the objections of the state’s consumer advocate.

Office of Public Counsel lawyer Joe McGlothlin had Deason read from 2002 commission transcripts showing the former commissioner’s concerns about the depreciation expenses then.

“I would hope that after the conclusion of this settlement, if it is approved, that we would not find ourselves in a situation where depreciation reserves are way out of balance from where they should theoretically should be,” Deason said in 2002.

But that’s exactly what happened. FPL found in its own study that its depreciation reserves are $1.25 billion, much more than usual.

“I’m trying to struggle to understand why if there is a theoretical surplus something cannot be done,” Commissioner Nathan Skop wanted to know. “Why would it not be appropriate to benefit consumers in the near term by reducing their rates?”

Because customers would have to pay more in the long run, Deason said.

“Sure it’s in the customers’ interest to be on this system the next four years,” Deason said.

But after four years, he said, “those customers are going to be paying higher rates…to provide some relief for customers during this four year period of time.”

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23 Responses to “Former utility regulator defends FPL’s $1.2 billion rate hike request”

  1. Tom Saporito Says:

    Thomas Saporito, please don’t post your plug for your candidacy for governor here as you have on every other article concerning FPL’s rate hike. Thank you.

  2. FRED EWALD Says:

    Sixteen years on the PSC and now working for the company he supposedly regulated during this time? lol…how effective can I be as a regulator if I plan on getting paid in the future by the compnay I am now reguating? This is certainly not ethical and I would hope the Post would lobby Tallahassee to change the law to outlaw this practice.

  3. Sean T Wright Says:

    Considering that I’m a accountant getting my license to practice tax law. I’m highly interested as to what method of depreciation reserves is being engaged in here. Then exactly how FPL Group is reporting those depreciation reserves in accordance with Title 26, United State’s Tax Law. After reading this article I’m of the opinion that the PSC needs to order a examination in conjunction with the Internal Revenue Service as FPL’s public state here is announcing unreported income hidden by a non-standard accounting practice. As I have a duty under my license to report such a public statement. I’ll be forwarding this to the IRS myself.

    Mr. Terry Deason, sadly your involvement with this whole thing since 2002 shows just how much FPL is willing to engage in questionable conduct with Florida leaders. Mr. Deason as you served on the PSC & now consult for FPL, this gives the appearance that you have been on FPL’s payroll the whole time while serving on the PSC. As a professional in Tax Law, I would not be allow to hold a government position then enter the private section & engage in the very same issues I worked on while in a government position. There is a conflict of interest on many levels here. As such and in accordance with the duties of my license I will be filing a complaint directly with the IRS on you Mr.Deason so the IRS can determine whether you hold the proper license in 2002 or today to setup & consult on this “depreciation reserves” you had involvement with. Which appears to me to be nothing more than a tax avoidance structure.

    Florida & FPL Customers need to just start moving to other options such as solar panels or wind turbines. A friend & family member in New York of mine is about to introduce a product called the windjammer. Which is being studied by Harvard, & is being held as a affordable option to all homeowners verse dealing with Local Power Company’s engaging in these very questionable practices.

    Look for yourself, http://www.windjammers.com

  4. Energy Says:

    1) Your link does not work it goes to some hotel.

    2) Assuming your link was for some small wind turbine – that does not work in Florida – they kill birds – and there is not enough wind

    3) Ask your family member in New York what they pay for electricity – I believe if you compare to what you pay you will quit all your accounting bs

  5. Sean T Wright Says:

    To Energy, I love the fact that you can cast such a informed position, but your not confident enough to put your name behind that.

    Energy said “I believe if you compare to what you pay you will quit all your accounting bs”

    Would you please in detail describe what method of accounting practice is “depreciation reserves”. Then show me under Title 26 where & how it’s reportable?

    Here’s a link to Title 26 for you.

    http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?&c=ecfr&tpl=/ecfrbrowse/Title26/26tab_02.tpl

    Sorry about the Wind Turbine Link. I have to find that for you. The inventor of it, who’s name is Gerry Brock, does not talk to me about it. My understanding of it from seeing a video test is it will work in as little of wind as 11-13 mph. More than enough for Florida. It’s design works with compressing air & the design had a built in shield for birds.

    But that’s not the issue here, plus in your disagreement with me you left out solar panels. What is you claim there?

    Before I shake it up with you. You need to explain to me that is verifiable, what the content of the article is talking about.

  6. Jim Says:

    If they want a rate increase, they better commit to picking up the tab for burying utilities in residential neighborhoods.

  7. Sean T Wright Says:

    Energy said “3) Ask your family member in New York what they pay for electricity – I believe if you compare to what you pay you will quit all your accounting bs”

    Over time, if a homeowner invested in a home power system. That homeowner would recapture that cost at some point through use, & credit’s. Making that power system a 0 cost system for power use at some point.

    This is why we have those credit’s out there. Your telling me that in your position that FPL or any power company will always be able to produce power to a customer that at some point will have no cost to the customer?

    Please in detail give me more information on that position.

  8. Sean T Wright Says:

    To Energy,

    Sorry, about link, here it is!

    http://www.windtamerturbines.com/

    Don’t hold me to this, but I believe from my understanding that it has a selling price around $3000.00 per unit.

    Looking forward to your response on case law for “depreciation reserves”.

  9. Smart Thinking Says:

    Sean,

    Look at the facts: the average wind speed in West Palm Beach is about 8 mph. 3 months of the year it might get to 10 mph. If you could make enough electricity to offset your bill $25 a month (this is highly unlikely) it would take over 10 years to get any pay back (you would then need to replace it because it would be worn out). This assumes you do not have to pay anything to install the wind thing.

    Wake up! Wind farms only work in desert areas like Texas and California. The only possible clean technology that will work for Florida is Nuclear and Solar. I believe our power companies are investing in both.

  10. Sean T Wright Says:

    To Smart Thinking,

    If you actually had those facts here I’d been happy to look. Where exactly did you post them?

    As with any technology price of product comes down over time. I’ve seen your 10 year figure. I honestly think it can be done in 7 or 8 years. But thats not what we are talking about.

    Smart Thinking, we live in a time of people being real. I’ve commented on something that at its root appears to violate a United States Code. A law I’m currently a candidate to receive a license to practice under. The issue here is a fee rate increase, which a issue in debate, has been put forward that by the article writing of testimony is not a standard practice under Title 26. Which means that FPL would be publicly seeking a rate increase while using standard to shield reportable income.

    This is a time for real people, not people using shields as yourself, to or for advocating for a public company to seek more money while being in violation of United States Revenue Laws.

    As you have satisfied a standard, I publicly say that you could be involved in conducting or engaging in activities that help that public company to be in violation of those Revenue Laws.

    I’ve put my name behind that!

  11. Monster Says:

    Sean,

    Thanks for submitting your resume. At this time our current opportunities are taken up by qualified candidates who live in the real world, and are not idiots who publicize their intentions to file licensing complaints with the IRS, a federal agency that has no jurisdiction over the state-regulated practice of accountancy.

    Sincerely,

    The Monster

  12. Sean T Wright Says:

    As I said real people!

    So your telling me that FPL Group does not file a tax return?

    Would you please advise under what law of the State of Florida or the United States you are citing?

    I do understand it will be a challenge for you but I’m willing to take the time.

  13. FSC Says:

    To Monster,

    Please rename yourself cockroach. Only a low life FPL scumbag would tried to tell people. That the people of Florida should be building FPL power plants. I bet 90% of FPL customers would leave them in a second given the right option.

  14. Randy Says:

    8:05 FPL just build the largest solar plant of it’s kind in Florida so they are investing in renewable energy here and around the country. On the ROE issue, they can ask for higher because they have to deal with hurricanes and the aftermath. There should be a reserve because Florida is due for another big one.

  15. Monster Says:

    @FSC, you seem to be an entirely different kind of idiot. Namely the kind that deciphers secret messages from words actually written on a page.

    Carefully remove the tinfoil from around your head and identify where the words “power” or “plant”, or even “FPL” appear in my previous post. Now carefully replace the tinfoil and stick your finger in the nearest light socket. I’m betting you’ll find the light socket works. Of course, no thanks to FPL.

    @Sean, please cite the exact page in your “candidate for license” handbook where a license to practice accountancy by a private individual has anything to do with filing a federal tax return. Further, cite the requirements for a federal accounting license. And while you’re at it fix me a nice glass of electricity.

  16. Sean T Wright Says:

    Per your request

    http://www.irs.gov/pub/irs-utl/pcir230.pdf

    Who’s allowed to practice.

    FPL Group files a Federal Tax Return every year, of which depreciation rates are apart, called a corporate tax return. Has not one thing to do with State of Florida accountancy. That goes to the IRS not the Florida Department of Revenue. But for the sake of it show me anywhere in the AICPA Rules where “depreciation reserves” are accepted as they are being apply here?

    I not going to make fun of a impaired person. I’ll happily explain to you what you don’t understand.

    Please display that your parents taught you some manners although. That to much to ask?

  17. Sean T Wright Says:

    To Randy,

    Yes FPL can ask for a rate increase. When the hurricanes of 2004 & 2005 came, they did just that. FPL also asked that it’s customers pay for infrastructure repair too. Which they got.

    FPL is not a government owned company, at what point does FPL make capital improvements to it operations, that isn’t the burden of customers? Every privately running business I’ve dealt with does capital improvements out of it’s profit. How many company’s are out there declaring a profit, then asking it customer based for a capital assessment to improve operations?

  18. Sean T Wright Says:

    Monster wrote “I’m betting you’ll find the light socket works. Of course, no thanks to FPL.”

    I just wanted to throw this out there. Every year more & more people are moving to solar panels & wind turbines for their home’s power. The light socket won’t work in that setup?

    As a personal opinion, I’ll be moving to not using FPL’s Services, because every year other options are coming out. What do you think FPL does then, stop me from using other options?

  19. Sean T Wright Says:

    So Monster, I wanted to give you a chance to read Publication 230. Did you read the part on page 17 Untied States Code 10.25 about former government employee’s?

    As I said in my first post. I would not be allowed to engage in the same practice Mr.Deason is with this consulting. Also if Mr. Deason is a attorney, CPA, or Enrolled Agent, anywhere, he is subject to the exact same Regulation of Pub. 230.

    Monster, I would like you to very, very clearly define this statement:

    Monster Wrote”qualified candidates who live in the real world, and are not idiots who publicize their intentions to file licensing complaints with the IRS, a federal agency that has no jurisdiction over the state-regulated practice of accountancy.”

    You need to clearly explain this right away as it looks to me you’ve asked by “pecuniary advantage” for me to committee a ethical license violation of omission knowledge with a public statement.

    I a cert that you have acted with “pecuniary advantage” as defined by F.S. 836.05. In this public forum with that statement.

    a copy’s attached for your review.

    http://www.leg.state.fl.us/STATUTES/index.cfm?App_mode=Display_Statute&Search_String=&URL=Ch0836/SEC05.HTM&Title=-%3E2009-%3ECh0836-%3ESection%2005#0836.05

    I suggest you chose your next words carefully.

  20. I dont trust them Says:

    All this is very interesting but I’d like to see them grilled on a different topic. Fuel charges, they have been charging us an increased rate for well over a year now since oil peaked. Why?
    It has been reported that they will not divulge the fuel data due to competitive reasons. Seems every time something doesn’t make sense they claim competitive reasons for secrecy blah blah blah….

  21. Dont understand Says:

    I am trying to figure out who and what is the reason for this Sean T Wright guy????? An accountant gone bonkers? Too many starbucks? What is this

  22. What you mean is Says:

    What you mean is that when you asked a question you didn’t think you’d get a response that would have some back up with it. Funny that you don’t understand. Usually when I get confronted I don’t pretend to be educated where I’m not. But you’ve got to address that problem yourself.

    The answer you seek is that because you didn’t continue beyond high school with a education, you are unable to comprehend what is involved with GAAP. So when the article stated,

    “depreciation rates in stone and deviated from normal accounting practices which would have spread out the costs over the lifetime of the equipment.”

    You had no clue that GAAP was being discussed which then further applies to federal taxes.

    It’s discussed in Publication 946.

    I don’t see how that’s Sean’s fault for you lacking knowledge. I’d put that in the category of you faking it. However, because you have entered that category you can now be classified as a wannabee.

  23. Thomas Saporito Says:

    Mr. Butterworth – here is the short answer to your employer’s request of you – the FPL rate case is without merit – FPL should have lowered its base rate on its own volition and cut executive salaries like other companies did around the country – FPL should now refund all costs and expenses involved in the rate case back to its customers.

    Thomas Saporito

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