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Electric Regulator Feels Current Of Uncertainty A Look At The Current Environment

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The Tampa Tribune

Published: November 1, 2008

Florida's Public Service Commission is torn by conflicting goals. The appointed board is trying to keep electric rates as low as possible during a year of rising fuel costs, yet it also wants the utilities it regulates to begin switching to renewable sources of energy, which at this point is more expensive than coal and natural gas.

PSC Chairman Matthew M. Carter II, a Tallahassee attorney and minister, and several staff members, here recently to hold hearings on TECO's requested rate increase, stopped by our office to discuss some of the challenges they face. Below is part of that discussion.

Florida's energy needs, Carter said, have increased 50 percent in the past decade. And, he says the state continues to grow by 751 people per day.

Q: Is Florida still growing that fast?

Carter: Other states would love to have the growth Florida is having. There are still pockets of growth in the state.

Q: TECO is asking for a rate increase (which, added to higher energy costs, could add 21 percent to a typical bill.) People see these utility companies as doing pretty well, with good salaries and good benefits. How much profit should utilities make for shareholders?

Carter: It may sound hollow, but the rates we pay in Florida are not as substantial as they are in other states. We rank in the lower costs. The state allows a rate of return. When they request a rate increase, it's not like they get it rubber-stamped.

Q: What is the rate of return?

Carter: It varies for companies. (TECO's authorized rate of return is a range of from 10.75 percent to 12.75 percent. The recent rate filing is for 12 percent.)

Q: The kinds of increases people are being hit with are forcing them to choose between turning on the lights or feeding the kids. It's really you guys who are guarding the gates for us. I wonder how you approach that?

Carter: We have accountants and engineers and staff to review that to make sure the I's are dotted and the T's are crossed. We look at it in the current environment where people are suffering.

The mid-course correction for fuel, we stretched it out for 16 months with a lower rate, (rather than recovering the higher fuel costs from consumers over four months.)

William C. Garner (Carter's chief adviser): Commissioners kind of took a gamble (in charging customers less per month for a longer period.) It paid off because fuel prices are coming down.

Q: Is there more we can do in conservation, using less electricity?

Carter: Florida is one of the leading states in demand-side management. In the context of getting people to practice conservation, we try different innovative programs.

The Legislature has come up with opportunities for renewables. For example, they allowed for 110 megawatts of solar energy and FPL (Florida Power and Light) applied for that.

Q: How much more will solar cost than the energy we're using now?

Carter: I hate to give you a number. Every time somebody comes to us talking about solar we get a different number. It is more expensive.

Garner: It's not been done on any scale, either. One of the issues with solar, the peak hours (of energy use) are late in the day when the sun is low in the sky. It makes for less efficiency.

Carter: In Florida, the places with greatest wind are places you probably wouldn't be able to put a turbine. If you want to get the wind, you start putting these huge wind turbines on the beach, and you're going to get some grief.

A lot of it has to do with whether or not the community will allow it. We say we want to go green, but when you get to the community level, people say we don't want it in our backyard.

Right now, renewables are 3.6 percent (of Florida's total energy use). In a decade, if we can overcome some of the technological challenges, we can get close to where the governor's recommendations were (20 percent by 2020). I'm an optimist.

Q: What if things stay the way they are (without technological breakthroughs.)

Carter: Then I'm not an optimist.

Q: How does California do it? (Last year renewables accounted for 11.8 percent of all electricity used in California.)

Carter: They've got a lot of wind. They've got solar. California has significantly higher rates than in Florida.

Garner: California has significant opportunities with hydro. They have less diffuse sunlight, proximity to the desert. They've made a policy decision. Some of our leaders are still struggling with that.

Q: If Florida is going to be a lot more reliant on renewables, where does the leadership come from? Do you see yourself as the person in this state who says this is the goal and we're going to meet it?

Carter: The short answer is yes.

We're going to create an environment in Florida to welcome renewable energy. We're going to say renewable energy is going to generate an economic-development climate in the state of Florida. We're going to protect our environment. We're going to do it in a cost-effective manner. We'll provide an environment to where the guy selling the water heaters, there's a market for that.

The people on Wall Street say we need to know if we loan money to these companies we're going to get our money back. We need to look at regulatory certainty. If we create a viable marketplace, we'll get competition.

Over time, renewables will be cheaper. If you can show the companies how they can reduce costs, they're going to do that.

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