Former utility regulator defends FPL’s $1.2 billion rate hike requestby Dara Kam | October 23rd, 2009
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.”