The Florida Legislature is Proposing to Raise Electric Bills
• By Barry J. Moline, Executive Director, FMEA
Of course, you’re probably wondering why legislators would deliberately want to raise utility bills. It’s a long story, but it all comes down to one thing, failure to follow directions. In kindergarten, we were supposed to learn how to get along with our friends, how to be polite, and how to follow directions. Some folks apparently didn’t get the full lesson.
The city of Vero Beach has been interested in selling its electric utility to Florida Power and Light (FPL) if it can iron out the complex details of the price and contract compliance. One particular contract of Vero Beach, with the Florida Municipal Power Agency (FMPA), has a straightforward, step-by-step process for assigning the contract to another entity. In fact, transferring the contract to another utility has successfully been done twice before by the cities of Homestead and Lake Worth.
In trying to help Vero Beach and FPL move forward on their deal, FMPA staff met several times and spent many hours walking them through the process of transferring the contracts, considering that must be done to fully exit the contracts. Unfortunately, both Vero Beach and FPL decided they didn’t want to follow that successful path others have used. Instead, and strangely, they’ve chosen a different path – an unsuccessful path to getting the deal done.
The problem with choosing a new path – this unsuccessful path – is that it moves the costs that Vero Beach should be paying onto the remaining utility members in FMPA and their customers. This is “cost-shifting,” and it’s unfair that other communities should be forced to pay for Vero Beach’s wishes.
Let’s say you and I own property together. Someday we hope to build on it, but for now we consider it an investment. We take out a 30-year mortgage. After two years, I decide I don’t want to own the land anymore. Can I just walk away without paying my portion of the mortgage? I think you’d say no, since you can’t afford to pay the mortgage by yourself. We could sell the land, but in a down real estate market, it’s not possible. That’s what Vero Beach is trying to do. They want to walk away from their financial commitments on contracts for electricity they signed with their fellow cities. That’s really unfair.
Instead of following the successful path shown to them, Vero Beach and its neighbor, Indian River County, and FPL, have decided to attack FMPA, with the goal of trying to twist the arms of FMPA’s member utilities to allow Vero Beach to exit its contracts. They’ve attacked FMPA in every forum they can find, including trying to pass legislation to impose new, unnecessary and burdensome state regulation that will raise FMPA’s member utilities bills – which will raise the bills of consumers and businesses across the state – to pay for Vero Beach and FPL’s questionable business practices.
The identical bills, HB 579 and SB 840, seek to impose four new burdens on FMPA and its members. First, the bill would impose PSC rate regulation on FMPA. Second, it would push the Public Counsel to intervene in FMPA rate hearings. Third, the bill would force the FMPA Board to be made up only of elected officials and fourth, it would require additional financial reporting.
None of these are needed, and here’s why. FMPA’s rates are regulated today by representatives of each of its members, appointed by the governing boards of each member. FMPA is a major electric utility and its operations can be complex. It requires a governing board that must devote many hours to research, ask questions, debate, and make decisions. It requires a significant time commitment. That’s why it’s so important for each FMPA member governing board to decide who it wants to be its representative. What’s most important is that each of FMPA’s governing board representatives puts in the time on important and sometimes complex electric utility industry issues and report to their governing body back home to guide the actions of FMPA. That’s the process. It works. Elected officials can already serve on the FMPA board if a member chooses them. No mandate is needed.
It is not necessary to impose Florida Public Service Commission regulation or Public Counsel involvement onto FMPA rate decisions. FMPA’s governing board exists to represent each member’s retail customers, and they are already doing that. The process is fully open to the public. All FMPA meetings are widely noticed in each FMPA member community, and if consumers can’t travel to Orlando for meetings, they can call in and participate. No additional layer of regulation is needed at the state level. The result of such regulation will be one thing: higher electric rates. Moody’s Investor Services and Fitch Ratings have stated so. Imposing an extra layer of new regulation delays decision-making, and puts decisions by local governing boards in jeopardy. This adds risk for investors, which causes credit ratings to drop. Lower credit ratings lead to higher borrowing costs – that is, higher interest rates for debt on infrastructure. With hundreds of millions of dollars in outstanding bonds, higher interest rates will lead to higher electric rates paid by consumers and businesses all across Florida. Why would anyone support higher electric rates?
Additional financial reporting is unnecessary. FMPA is already a fully transparent organization, subject to all of Florida’s sunshine laws and open records regulations. Anything that anyone wants to know, they can already receive. Today FMPA conducts a robust annual financial audit, which is filed with the Auditor General’s office. The report is a complete accounting of FMPA’s income, revenues and assets.
Meanwhile, FPL, Florida’s largest utility, has lost $4 billion in ratepayer funds since 2002, a shockingly large number. Last year the Florida PSC allowed FPL to continue hedging, investing in risky natural gas fracking in Oklahoma. As of November 2016, the project has lost $5.5 million, and FPL reported to the PSC the project will be a financial loser in 2016 as well. FPL received permission from the PSC to spend $88 million on the losing project in 2016. Where is the outrage?
FPL and Indian River County refuse to following straightforward directions to get their deal done, but instead they blame and attack FMPA. These questionable business practices of Vero Beach, Indian River County and FPL must be stopped. Furthermore, FPL’s record of losing money on hedging far outpaces every single utility in Florida; where is the investigation into their billions of dollars of losses?