Fight Over FPL Irma Costs, Tax Cuts Continues

Posted By: Garnie Holmes Industry , Legislative/Regulatory ,

A fierce debate about Florida Power & Light’s plan to use federal tax savings to cover costs of restoring electricity after Hurricane Irma is headed to the state Supreme Court.

The state Office of Public Counsel, which represents consumers in utility issues, filed a notice this week that it is appealing to the Supreme Court after the Florida Public Service Commission signed off on FPL’s plan, according to documents posted Friday on the Supreme Court website.

The notice, as is common, did not provide details of what the Office of Public Counsel will argue in the appeal. But the office has contended, in part, that hundreds of millions of dollars in savings from a 2017 federal tax overhaul should flow through to FPL customers through lower base electric rates --- rather than being used to cover storm costs.

The Public Service Commission voted in May to approve FPL’s plan and issued a formal order June 10. The appeal to the Supreme Court stems from that order.

The case involves a tangle of regulatory and tax issues rooted in Hurricane Irma, which caused power outages in large parts of the state in 2017, forcing FPL to spend about $1.3 billion to restore electricity and rebuild systems. Utilities in the past have typically been allowed to recoup such costs from consumers by tacking extra charges onto their monthly bills.

But in late 2017, Congress and President Donald Trump approved a tax overhaul that included reducing the corporate income-tax rate from 35 percent to 21 percent, providing huge savings to companies such as FPL.

The utility decided to tap a reserve to cover Irma restoration costs and then replenish the reserve with savings from the tax overhaul, avoiding the need to tack extra charges onto consumers’ bills to pay for Irma restoration.

In approving the plan, the Public Service Commission pointed to a 2017 base-rate settlement agreement that included the reserve to help FPL manage fluctuations in costs and revenues. The settlement also allows FPL to earn a maximum return on equity --- a closely watched measurement of profitability --- of 11.6 percent. Commissioners said the utility has not exceeded that profit limit.

“At its most basic level, what to do with FPL’s tax savings boils down to whether FPL’s current rates continue to be fair, just and reasonable given the unique circumstances present in this case,” the Public Service Commission said in its June 10 order. “FPL is the only investor-owned utility with a reserve amount. FPL contends that allowing it to continue to operate the reserve amount and use the reserve amount to pay for the prudently incurred costs of Hurricane Irma is appropriate because it is not overearning.”

But the Office of Public Counsel, which has been backed on the issues by the Florida Retail Federation and the Florida Industrial Power Users Group, argued that the plan would prevent FPL’s tax savings from being properly passed along to consumers through lower base rates. At one point in the dispute, Deputy Public Counsel Charles Rehwinkel dubbed the FPL moves the “great tax surplus heist of 2018.

Article reposted with permission from The News Service of Florida.