Floridians could pay billions to power companies to stormproof the grid
NBC - 8 WFLA (Tampa, FL)
TAMPA, Fla. (WFLA) — The Florida Public Service Commission approved four plans submitted by power companies allowing roughly $22 billion for efforts to "harden" the state power grid over the next 10 years. On Thursday, commissioners will vote on just how much Florida power bills will go up.
Those billions will be paid solely by Floridians. Even with some reductions by the commission, the amount bills will go up wasn't substantively changed.
Charles Rehwinkel of the Office of Public Counsel, the changes only "shaved one penny off" the monthly bills for FPL customers, and just three cents off each month for residents served by TECO.
The planning process started months before Florida's biggest hurricane in years knocked on state doors. The rules for the proposed storm protection plans were set earlier, after legislative action in 2019. It was signed into law by Gov. Ron DeSantis in June of 2019.
Florida Power & Light, Duke Energy Florida, the Florida Public Utilities Company, and Tampa Electric each submitted petitions to state regulators, asking for approval to stormproof their power systems in the event of extreme weather events.
State statutes require these plans be submitted for 10-year periods, and that the plans must "explain the systematic approach the utility will follow" to reduce how much it costs to restore power during outages from extreme or severe weather, and enhance the reliability of the power grid.
The proposals were examined and responded to with what amounts to counteroffers by the Florida Office of Public Counsel. The OPC is charged with advocating on behalf of Floridians, specifically utility consumers, when it comes to state and federal regulators, as well as in Florida and federal courts. The OPC is "independent from any regulatory authority and accounts only to the people of the state of Florida through the legislature," according to a description of their duties.
The Florida Public Service Commission will vote on cost recovery plans in a final set of hearings scheduled to start on Nov. 17 for each power utility. The four companies that submitted plans are all publicly traded.
Despite a back and forth between the OPC and each company, a member of the consumer legal counsel said further revision of the costs to consumers amounted to a small change.
While minor reductions were applied to the filings by FPL and TECO, Rehwinkel told WFLA.com that "The commission made no changes to their plans that affect 2023 so they were only required to file a letter saying that there was no change to the 2023 clause numbers."
According to FPSC, commission's "annual cost recovery clause hearings will begin at 9:30 a.m. on Thursday, November 17. The hearings will determine 2023 recovery charges for fuel and purchased power, storm protection plans, environmental, conservation, and other costs for customers of Florida Power & Light Company; Duke Energy Florida, LLC; Tampa Electric Company; and Florida Public Utilities Company."
Process for approval
The five members of the Florida Public Service Commission are all appointed by the governor and approved in a confirmation vote by the Florida Senate. The commission chairman is chosen for two-year terms by a vote among the commissioners.
The commissioners are set to vote on all four proposals for storm protection plans in November. Each plan will cover 10 years of power system and grid needs by the public companies, with three year incremental rate increase proposals. Each company sent a proposal, and the Office of Public Counsel sent back counter-recommendations. The FPSC reviewed each plan and counter from OPC, approving them as-modified on Oct. 4. In hearings starting Nov. 17, they'll finalize cost recovery options.
If the commission approves the plans, they are enacted with no further governmental regulation, aside from a legislative requirement to report on activity and completion progress, in addition to actual costs and rate hikes.
An Oct. 4 announcement on the plans submitted, issued by the PSC, said they were approved, with modifications. With the approved, but modified, plans, Florida officials greenlit a collective $22 billion in what amounts, purely, to rate hikes. It was only a slight reduction from the proposed $22.6 billion included from the proposals.
"In its decision, the Commission removed some proposed programs because they appeared to be routine utility functions rather than storm hardening functions," the commission announced. "As a result, the investor-owned utilities (IOUs) will file amended plans within 15 days, or by Oct. 25. Today's decision resolves all issues in the companies' storm protection plan (SPP) dockets."
During a three day hearing process in mid-November, the PSC will review cost recovery options for the four power companies to enact the protection plans.
"As required in the storm protection law, PSC rules established a separate cost recovery mechanism for storm protection activities," commissioners announced. "IOUs may seek PSC approval to recover incremental costs annually—in a separate recovery clause—similar to their request for fuel cost recovery."
With the vote coming in about a month, and modified proposals submitted by the OPC approved by FPSC on Tuesday, storm damage from Hurricane Ian has led to some letters of support by county commissioners across Florida.
Manatee County Commissioner George Kruse requested the commissioners approve the spending plans for storm protection and hardening of the electrical grid, however he wrote them in his individual capacity, and not on behalf of the Manatee Board of County Commissioners.
Citing damage from Hurricane Ian, Kruse said that while he is a "strong advocate for small government and typically take the side of lower taxes, rates and fees whenever possible," it was "fundamental" for citizens' safety to be provided for.
"We have once again witnessed the frustration of all our residents as their power goes out for an extended period of time. It disrupts business, it lowers the quality of life of our citizens and it causes issues with our infrastructure, lift stations and schools," Kruse wrote in part. "We should be encouraging our utility providers to maximize the funding and speed of hardening all our systems as we see these storms continue to come stronger and more frequently."
As an end result to the decisions of the Florida Public Service Commission, customers for two of the power companies submitting storm protection plans will save pennies as they are charged billions of dollars.
Florida Public Utilities Company
By proposed cost, FPUC was the smallest by dollar amount. Before reductions proposed by staff from OPC, the power company requested approval for a plan totaling $243.1 million. Under the plan submitted by FPUC, for transmission and distribution improvements, costs would've been split between:
* Distribution — Overhead Feeder Hardening
* Distribution — Overhead Lateral Hardening
* Distribution — Overhead Lateral Undergrounding
* Distribution — Pole Inspection & Replace
* T & D — Vegetation Management
* Future T&D Enhancements
* Transmission/Substation Resiliency
* Transmission — Inspection and Hardening
* SPP Program Management
Instead, OPC staff made a counterproposal for a total of $83.3 million, taking away funds for the proposed substation resiliency and future enhancements outright, while reducing cost of programs for lateral hardening and undergrounding. Reasons cited by OPC staff for the reductions include "limit to impact customers," lack of compliance with Rule 25-6.030, which PSC said was at issue due to cost outlines being "vague," and removal of substation resiliency costs due to lack of prudence.
Had FPUC's proposal been approved without modification, commercial customers would have seen their bills rise by 23.34% through 2025. Industrial bills, by comparison, would have risen 9.21% in the same time period. The increases, had they been approved, would have meant residential bills going up at least $6 per month in 2023 and 2024, before going up an additional $15 in 2025.
Based on inflationary pressures, OPC staff said those increases were too high, and asked for alternatives to be implemented that would reduce the rate increases' impacts on customers. Vote records from Oct. 4 show PSC approved the company proposal with no substantive adjustments or changes for cost. Instead, the PSC ordered that Florida Public Utilities Company remove the Future T&D Enhancements program and the Transmission and Substation Resiliency program.
As a result, FPUC's amended filing said the new projected expenses "do not include costs for either of the removed programs," and so the storm protection plan cost recovery clause of their proposal was financially unchanged.
Tampa Electric Company
While FPUC asked for $243.1 million, Tampa Electric Company asked the Public Service Commission for roughly $1.45 billion. Instead, OPC staff's counteroffer for approval was $600 million, just under 60% of the initial proposal.
The proposal from TECO would have customer rates increase by 3.82% over three years for residential power, while industrial bills would have increased by a slightly smaller amount at 3.56%. Month to month, residential bills would have gone up by roughly $14.70 per month by the end of three years, with the largest jump in the third.
Whereas FPUC asked for its millions to pay for things like distribution, environmental management, and future maintenance, TECO asked for its $1.45 billion request to cover hardening and undergrounding, among other proposed needs.
Funding proposals for the substation extreme weather needs, and the transmission access enhancements were outright rejected by OPC staff while reducing the proposal due to lack of compliance with state regulations. Specifically, as with FPUC's rule issues, lack of compliance with 25-6.030. Citing that rule, OPC staff said TECO's proposal had a "flawed" costs and benefits comparison.
Representatives for TECO said that assessment was incorrect. Further discussion in the responding documents had TECO saying their proposal matched risk and benefit analysis requirements of the state statutes. The proposal, modified by OPC staff, moved to the next step, a vote.
Power companies TECO, FPL, and Duke Energy Florida have all had rate hikes approved by FPSC to handle cost increases of natural gas during the current inflationary period. The rate hikes proposed and approved by FPSC are an additional cost to consumers' monthly bills over the next three years, and beyond.
During an Oct. 4 hearing, the Public Service Commission's staff recommendation was to continue the spending levels for undergrounding needs previously agreed to, $79.5 million per year as of 2021 for 10 years, while removing the request for a transmission access enhancement program.
Commissioner Gary Clark expressed concern over costs to residents amidst the hearing, mentioning his expectation that companies would ask for storm recovery costs in addition to the cost increases that could occur from the storm protection plans.
"We have a plan that seems to be working, the effects that we have seen, the early, preliminary results we have seen over the past two years have had very positive effects on increasing resiliency," Clark said. "We also have a mandate from the legislature to look at these costs and see what was feasible, what was prudent."
He said some of the plan's items did not "fit the definition of storm hardening."
Following further discussion, the commission voted 3-1, approving the plan as proposed, with two changes. The transmission access enhancement portion was removed, and per the motion by Commissioner Mike La Rosa, the other funding items were approved "as the company presented."
Even with modifications approved on Oct. 4 by the Public Service Commission, the reduced cost to the company's consumers was negligible. TECO customers will only save $0.36 in the first year of the new, higher rates.
TECO filed an amended proposal on Oct. 14, to be approved by the commission, which if approved will solidify the rate increases.
Duke Energy Florida
Like FPUC and TECO, Duke Energy Florida asked for approval of its storm protection plan. Unlike TECO or FPUC, Duke asked for $7.17 billion. In their counter offer, OPC staff reduced the program funding request to $5.161 billion.
Funding recommendations were reduced to zero for proposal items self-optimizing grid, underground flood mitigation, substation flood mitigation, loop radially fed substations, and substation hardening.
Funding proposals for feeder hardening and lateral hardening were approved but reduced, citing the need to limit the impact of costs to customers. Costs in the proposal for structure hardening efforts were approved, though reduced, based on lack of compliance with SPP rules, according to documents provided by the OPC.
As far as rates, had Duke's proposal been approved outright, residential customers will see their bills go up by $19.48 per month by the end of three years.
Commercial customers, businesses, would have their bills per month increase by up between 3.7% and 4.3%. Industrial customers, by comparison, will see their bills rise by between 3.1% and 4.5%.
Like with FPUC, Duke Energy Florida's amended filing contained no substantive financial adjustments upon the Oct. 4 approval by the Public Service Commission. At the hearing, commissioners ordered the removal of Duke's Transmission Loop Radially Fed Substations program from their storm protection plan proposal.
Following the approval with modification, Duke Energy Florida filed a letter with the PSC stating that "2023 projected SPPCRC expenditures did not include any costs pertaining to removed program," so no amendments to their cost projection's petition, testimony, or schedules were necessary.
In addition to the increases to cover the Storm Protection Plan cost recovery, a Duke spokesperson told 8 On Your Side's Mahsa Saeidi that, as far as the fuel cost utility rates, "If you do the difference between December 2022 and January 2023 it's a 12% increase. Of if you are looking for an 'average' across the year, it would be 14%."
Additionally, the representative said Duke Energy Florida's current FPSC "filing estimates that in 2023 a typical residential 1,000 kwh bill will average $168.90; the increase is driven by continuously increasing natural gas prices."
Florida Power & Light
The largest proposed funding amount for a single protection plan of the four utility companies was submitted by Florida Power & Light, which proposed $13.77 billion in funding for their storm-proofing efforts.
The Office of Public Counsel instead countered with a $10.25 billion version of the proposal. Like the other companies, the FPL plan will be voted on Oct. 25. All four companies will have hearings, followed by votes, with the Florida Public Service Commission.
Of the power companies making storm protection proposals, FPL had the fewest individual items reduced or removed by OPC in the counter-proposal. Funds for distribution lateral hardening were reduced by roughly $3.4 billion, to a flat $6 billion as recommended, while $16 million was taken off for substation storm surge and flood mitigation, and another $116 million for transmission access enhancement.
The reduction for hardening was made to limit the impact on customers' bills, while the storm surge and access provisions were cut for lack of compliance with SPP rules, according to the OPC document.
Based on the initial proposal from FPL, customers could have seen rates go up less than a full cent per month per year, over three years, for residential bills. Commercial and industrial customers had more expensive increases in the proposal from 2023 to 2025, but nothing all were less than $1.50 per month.
For residential customers, cost increases were proposed at between $0.00431 and $0.00771 per kilowatt per hour. However, monthly bill estimates for power company rates are typically calculated on an average use scale of 1,000 kWh. Therefore, customer bills would increase between $4.31 and $7.71 per month, for a total increase of $18.06 per month, averaged.
The FPL documentation reviewed by OPC would mean a potential 40% rate increase from 2023 to 2024 for residents, before going up to 65% higher by 2025.
Commercial customers, by the same calculation, would potentially see bills go up between $730 to $1,330 per month, while industrial customers would see between $100 to $174 per month added onto their power costs.
OPC's Rehwinkel told WFLA.com that for FPL, the "Original 2023- only projected revenue requirement (after removing the winterization program) $366,980,070." After review and amendment in mid-October, the revenue requirement was changed to $366,315,710 following the Oct. 4 approval by PSC.
According to Rehwinkel, "customer impact of the vote was $664,360, or shaved one penny off their monthly bill." The comment from the counselor was based on simple math. The reduction of cost for 2023 was $664,360.
Speaking with WFLA Investigative Reporter Mahsa Saeidi, FPL said the typical 1,000 kWh bill for one of their customers was $120.67. Should the rate hikes be approved, bills in January 2023 would go up to $125.39 for their typical customers. In February, once a planned one-time refund was finished, bills would go to $129.59.
"Not included in these bill projections are the higher-than-expected fuel prices in 2022 which are not reflected in today's rates, as well as costs associated with FPL's hurricane responses in 2022," FPL said in its response. They also clarified that should the SPP cost recovery plan be approved, proposed charges could be revisited later.
Spread across the company's 5.6 million customers in Florida, the bill decrease on the storm protection plan proposal was only $0.118 per year.
The cost recovery proposals from each power company only include tentative three year increases, which can be revisited again after approval, multiple times.
"The Storm Protection Plan Cost Recovery Clause is reviewed on an annual basis," FPL said in a statement. "The proposed charge is included in the proposed bill for next year and is one of many cost recovery charges subject to Thursday's PSC hearing."
The hearings on cost recovery for all four companies will start Nov. 17. WFLA.com has reached out to the commission about the previous hearing, when the plans themselves were approved.
Each company that submitted SPP Cost Recovery plans will be able to revisit the accompanying charges annually.
Due to the cost recovery status being pending, the commissioners are unable to provide comment on the process or their votes. WFLA Investigative Reporter Mahsa Saeidi has also reached out to the four power companies for comment on Thursday's hearings.