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Power to the People

[Photo: Larry Coltharp]

Let’s say a hurricane comes along, and you’re without power for a few days. Should you have to pay the power company for the power you didn’t use?

The Florida Public Service Commission thought so in July 2005. By a 3-1 vote, it included $33 million for “lost revenues” in a Florida Power & Light rate increase intended to cover extra costs incurred during the 2004 hurricane season. FPL’s total request was for $356 million.

Rick McAllister, president of the Florida Retail Federation, the only major business organization that regularly intervenes in power cases, complains that Publix and gas stations and other retailers are buying generators while FPL charges for outages. He calls the PSC vote “a horrendous decision,” one of several in the last few years that “have dismayed us.”

A retail federation ally, the one who matters most now, is Charlie Crist, attorney general at the time and now the governor who appoints the PSC. Among the commissioners who approved that $33 million: Chairman Lisa Polak Edgar, who will be up for reappointment in 18 months.

Mike Twomey, a former PSC staff counsel who represents AARP and others in PSC proceedings, says Crist’s recent appointments of Nathan A. Skop and former state Sen. Nancy Argenziano “signal an end to that kind of decision-making.” McAllister says he’s “optimistic.”

But how different will the PSC be? It oversees rates for investor-owned electric, natural gas and water companies in Florida, rules on new power plants and referees competition among local phone providers. How much harder will it push utilities on rates and environmental issues? Will any of the other commissioners sidle up to the newcomers? Or will they be planning their exit strategies, which often lead to nice salaries at utilities or their law firms?

“Maybe there is a turn that it is taking place,” Argenziano says, though disclaiming criticism of her current colleagues. “Unfortunately, the public has a picture of the Public Service Commission ... as being maybe too far to one side, the utility side.”

A new attitude won’t be enough, though. Facing experienced, well-prepared utility lawyers, commissioners need experience, knowledge, determination and meticulous preparation. Results are shaped not just by votes but by commissioners’ questions during hearings and well-articulated reasoning that can withstand appeals to a usually deferential Florida Supreme Court.

Argenziano learned the lesson the hard way at her second voting conference in May. The PSC was being asked to raise water rates for Utilities Inc. customers in Pinellas, Pasco and other counties by more than 40%, or about $5 a month. Is there any way, Argenziano asked the PSC staff, to avoid such a large increase all at once? No, she was told, once you decide that a utility deserves a certain rate of return, you can’t postpone the rates needed to earn that return.

Argenziano voted for the utility. “I came very close to voting no,” she told me, but her inexperience and her arrival at the tail end of the case gave her no basis for challenging the staff report.

Skop, however, struck one small blow for consumers. One of Utilities' water systems had weaker consumer satisfaction levels and deficient water-quality under new, higher environmental standards. (The water quality itself had not changed.) Skop proposed that those customers not be required to contribute to Utilities' costs for the rate case, a token $4,000. His colleagues agreed.

Two weeks later, against a staff recommendation, the commissioners unanimously rejected an FPL coal plant in the Everglades.

Something’s happening here.

The days of old

It brought to mind those thrilling days of yesteryear when Paula Hawkins, a Republican activist and self-described “Maitland housewife,” won election to the PSC and spent the better part of the 1970s as a thorn in the side of Florida’s utilities. Hawkins made quotable speeches, tipped off reporters and launched crusades. She made phone companies stop charging money at pay phones for dialing 911. “You need a dime to stop a crime,” Hawkins would say as her mouth twisted into a sarcastic grin. Her notoriety got her elected to a term in the U.S. Senate in 1980.

Argenziano cites Hawkins, now 80 and living with her husband in Winter Park, as a role model.

Joseph P. Cresse, a former state budget director with a Matlock manner, joined the PSC as Hawkins was leaving. He lacked Hawkins’ flair, but he was persistent. He told the PSC staff to offer its best judgment and be prepared to defend it.

Both new members were guarded in interviews. Argenziano repeatedly referred to “fairness.” Skop said he would “work hard to protect the interests of Florida consumers” and said “quality of service is very important to me,” but he deemed discussion of a case “inappropriate.”

People who have spent much of their careers around the PSC express concern about the lack of experience among current commissioners, who make $132,690 a year. Terry Deason left the PSC in January after 16 years as a commissioner and more than a decade of PSC-related experience before that. (He dissented on the $33 million for FPL.) Edgar, now the senior member, has been there less than three years. A lawyer, Edgar had been a deputy secretary in former Gov. Jeb Bush’s Department of Environment Protection since 1999.

In Deason’s place, Bush nominated former Rep. Ken Littlefield, who had voted in 2003 for legislation that cleared the way for one of the largest phone rate increases in Florida history. Crist abandoned Littlefield’s nomination and appointed Argenziano, who had voted against the phone legislation. She has no expertise in a utility field but is dogged and has political status as an ex-senator.

Bush appointed Matthew Mark Carter II and Katrina Tew (now McMurrian) to the PSC in January 2006. McMurrian had been on the PSC staff for 11 years. Carter had worked in the House. His career has morphed from the Army to political PR consulting to financial adviser, then law school. Carter moonlights as the preacher at Beulah Hill Missionary
Baptist Church in Gretna.

Skop is an engineer who also went to law school. He worked on airplanes for Boeing and nuclear subs for General Dynamics, then managed wind farms in California for an unregulated subsidiary of FPL.

Rate jolt

In an interview, Edgar took exception to the idea that there is a “turn” in the PSC attitude toward consumers. “I think I am very consumer-friendly and consumer-oriented,” she said.

But in the past two years, power rates have gone up about 20%, driven largely by rising fuel prices but also by storm-repair charges. In 2005, consumer advocates cut a deal with FPL and Progress Energy to freeze basic rates until 2009, but annual “cost adjustments” have increased dramatically. A small commercial customer of Progress pays $929.87 a month vs. $768.97 in mid-2005 for 10,000 kilowatt-hours.

Florida’s PSC has been viewed by Wall Street as accommodating to utilities. A former commissioner says a financially strong utility will benefit consumers in the long run, “like an individual who has a favorable credit rating gets a better interest rate on a loan.” Able to finance expansion as the state grows, Florida utilities have also avoided blackouts, he noted.

In May, the bond-rating agency noted that recent PSC appointments have produced “some regulatory uncertainty.”

Some people hope it’s just the beginning.