FPL wants to raise base rates for businesses up to 28 percent

Imagine paying more than $1 million a year in electric bills. For South Florida's hospitals, which must operate around that clock, that cost is a reality.

"We collected data from 2011 from our hospitals, and it was running over $1 million a year, on average," said Linda Quick, president of the South Florida Hospital and Health Care Association.

Quick said hospitals have already had to slash their budgets due Medicaid cuts by the Florida Legislature this year and last year.

Now Florida Power & Light Co. wants to raise the base rates it charges medium and large businesses by 16 to 28 percent. FPL officials say that less than one percent, or 3,500 large businesses, will experience the higher end of that range, and the base rate hike will be offset by fuel costs which are projected to be lower next year.

In March, the Juno Beach-based utility filed a $690.4 million request for a 2013 base rate increase for its 4.1 million residential customers and 520,000 commercial and industrial customers.

Marlene Santos, FPL's vice president/customer service, said at a customer service hearing in West Palm Beach in June that the increase is needed in part to pay for the cost of the new $1 billion Cape Canaveral plant scheduled to start up a year from now. The company is also seeking a higher return on equity and now has the lowest, at a midpoint of 10 percent, of all the state's investor-owned utilities.

Florida Public Counsel J.R. Kelly, who represents ratepayers in the case, is recommending a $253 million reduction in FPL's rates, including lowering its ROE to 9 percent.

The Florida Public Service Commission is scheduled to hear the rate case for 10 days beginning Aug. 20, with a decision expected by November.

For a 1,000 kilowatt-hour residential customer, the $7.09 base rate increase would result in an additional $1.41 per month. Base rate increases for residential, commercial and industrial customers would be offset by a decrease in fuel costs.

For a major hospital or large hotel with a typical monthly bill of $87,562, the base rate would increase by 27 percent, or $8,447. If the PSC allows the increase, the bill will grow to $89,189, a increase of two percent, or $1,627 a month, according to data provided by FPL.

"Based on our latest projections, the net change in the bills for our large hospital customers in our territory would range from a decrease of about five percent to an increase of less than two percent. The vast majority fall into the plus or minus one percent percent range,"said FPL spokesman Mark Bubriski.

Bubriski said that for business customers overall, the net bill change is expected to range from a decrease of four percent to an increase of three percent, with the smallest businesses realizing the biggest benefits.

Hospitals cannot afford any increase at all, Quick said. She's not reassured by FPL's calculations that the hospitals' bills will be offset by lower fuel costs.

"I was somewhat heartened to find they have control over that. The president of the U.S. can't control the price of fuel," she said. "I don't have confidence enough in that prediction to be willing to go up 28 percent in the base rate. That doesn't get changed."

While fuel costs fluctuate, a base rate increase would be permanent.

"We just think it is bad timing, the economy being what it is. Health care reimbursement prices, income and revenue have been slashed. The state has cut Medicaid two years in a row — 12 percent in 2011 and 5.6 percent in 2012. Hospital reimbursements are going down," Quick said.

The SFHHA is an intervenor in the rate case. Its 40 member hospitals have been joined by an additional 30 hospitals which are outside South Florida, but within FPL's 35-county territory, to fight against the rate increase.

Being an intervenor gives the association the right to ask questions and do discovery, similar to what would happen in a typical case heard in a courtroom, although the rate case is a quasi-judicial proceeding. It has hired a team of attorneys to represent it.

Other intervenors representing businesses include the Florida Retail Federation and the Florida Industrial Power Users Group, whose membership includes the state's largest electricity users such as supermarkets and manufacturers of pulp, paper, cement, phosphate and chemicals.

"Asking businesses, particularly large businesses that employ a lot of people and pay a lot already, to ask them, while we are still in the throes of recession or emerging from the great recession, to pay that kind of base rate increase is unworkable and unwarranted," said Jon Moyle, of the Moyle Law Firm in Tallahassee, which represents FIPUG.

Most people would agree that in tough economic times, raising

taxes isn't a way to stimulate the economy, Moyle said, and electric rates have a similar effect.

"Rates and taxes are from the same family. They're being imposed by government to fund monopolies. Consumers don't have any choice. The proposal to sock businesses with these exceedingly high increases hopefully will not be granted," he said.

"The governor is working hard to attract jobs. If you are taking action to increase significantly the rates of the big businesses that are in place, and maybe looking to expand, it seems that is a real mixed message," Moyle said.

The retail federation's Wright's take on the case is that FPL doesn't need the rate increase, and without it, consumers will have more money available.

"If the PSC determines to deny FPL's request altogether, that will mean that you, FPL's customers, will have another $690 million a year to spend on groceries, rent, gasoline, and your families. No base rate increase, your rates will come down by the amount of the fuel cost about $5.50 per month," Wright said at the customer service hearing in Sarasota.

Quick said she hopes this rate case will be as successful for the intervenors as the last one in 2009.

"This is our third time opposing FPL's rates before the PSC," Quick said. "Last time we opposed their effort at getting a $1.2 billion increase. The PSC only gave them $75 million. We did a pretty good job."

Florida Power & Light Co. Proposed Base Rate Hike

What It Would Mean for Businesses Typical Monthly Bill

Business Size Jan. 2012 bill Proposed Base Increase 2013 Bill Change

Small $123.33 $2.07/3 percent $118.31 $-5.02/-4 percent (non-demand, constant rate)

Small $1,485 $91/16 percent $1,462 -$23/-2 percent

(demand, rate changes at peak times)

Medium $18,074 $1833/28 percent $18,584 $510/3 percent

Large $87,562 $8,447/27 percent $89,189 $1,627/2 percent

Source: Florida Power & Light Co.

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