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Settlement reached on utility hurricane costs

Nearly two years after Hurricane Michael devastated parts of Northwest Florida, Gulf Power and consumer representatives have reached a proposed settlement on costs of restoring power and rebuilding damaged parts of the electric system following the storm.

Gulf contended that it should be able to recoup $295 million from customers, but the state Office of Public Counsel, which represents consumers, disputed that amount. The two sides reached a settlement last week that would trim $5 million, along with requiring Gulf in the future to take steps to better track storm-related costs.

The Florida Public Service Commission is scheduled to consider the settlement during a Sept. 15 hearing.

“The agreement represents a reasonable and mutually agreeable compromise of competing positions and fully resolves all issues raised in this docket, and many matters beyond the scope of this docket,” a motion to approve the settlement said. “Considered as a whole, the agreement fairly and reasonably balances the interests of Gulf’s customers and Gulf. Approving the agreement is consistent with the commission's long-standing policy of encouraging the settlement of contested proceedings in a manner that benefits the customers of utilities subject to the commission's regulatory jurisdiction.”

Utilities have long been able to pass along storm-restoration costs to customers, but they must be able to justify the costs at the Public Service Commission.

Gulf, the largest utility in Northwest Florida, faced a major restoration effort after the Category 5 Hurricane Michael slammed into the Panama City area in October 2018 and barreled north into Georgia. Among other things, Gulf needed 8,000 workers, including 7,000 from other utilities or contractors, to help restore the system, according to a filing last month at the Public Service Commission.

Gulf in early 2019 estimated that its Michael-related costs would total $342 million and received approval from the commission to begin recouping the money from customers in July 2019 on an interim basis. But it needed to return to the commission for final approval of actual costs.

The utility last November put those costs at $295 million, which led to a months-long process in which the Office of Public Counsel ultimately argued that Gulf’s costs were about $260 million. Among the disputed issues were whether costs of some materials and supplies were storm-related or whether they were more normal operating expenses.

That led to the settlement, which also requires Gulf to make changes in the process of evaluating storm-restoration costs. Those changes, which would take effect with the 2021 hurricane season, are designed to “help minimize the hourly contractor costs and equipment rental rates” and are based off another settlement involving Florida Power & Light. Gulf and FPL are both owned by NextEra Energy and plan to merge.

The interim approval last year of restoration costs added $8 a month to the bills of Gulf residential customers who use 1,000 kilowatt hours of electricity a month --- a common benchmark in the utility industry. The interim plan was based on the charges being in place for five years.

In the November filing seeking $295 million in actual costs, Gulf proposed keeping in place the $8-a-month charge but said it would be needed for 53 months, rather than five years.