Fight in Fla. Over Who Gets Tax Cut Savings After Hurricane Irma

Ratepayer advocates want Florida Supreme Court to review FPL's 'great tax surplus heist'

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Florida's Office of Public Counsel (OPC), which represents consumers in utility-related issues before the state's Public Service Commission (PSC), in June signed off on a deal accepting Florida Power & Light's (FPL) contention it incurred $1.375 billion in expenses in restoring electricity after Hurricane Irma in 2017.

On Tuesday, the PSC approved that agreement between the FPL, the OPC and the Florida Industrial Power Users Group [FIPUG].

But the OPC never agreed with the PSC's June 10 order that FPL be allowed to keep $772 million in "windfall" tax savings from the federal Tax Cuts & Jobs Act of 2017 to help it recoup the $1.375 billion it claims it spent to restore power in Irma's wake.

The OPC, FIPUG, and the Florida Retailers Federation (FRF) argued during a series of public hearings that allowing FPL to keep its tax reform savings violated the PSC's own agreement with utilities to share tax savings with ratepayers, not use it to replenish storm-drained reserves.

"The commission's decision was a big win for FPL and a big loss for ratepayers," OPC attorney J.R. Kelly said after the PSC's decision. "The commission failed to keep ratepayers' interest at heart."

Deputy OPC attorney Charles Rehwinkel called the ruling the "great tax surplus heist of 2018."

On Wednesday, according to documents posted by the Florida Supreme Court Friday, the OPC filed notice seeking an administrative appeal of PSC's decision before the state's highest court.

In 2016, the PSC froze FPL's base rates in a multi-year settlement with the OPC and FRF that included a maximum return on equity of 11.6 percent and approved FPL's use of a financial reserve.

In December 2017, Congress passed the federal tax overhaul, which reduced corporate income tax rates from 35 percent to 21 percent.

In February 2018, the PSC ordered utilities to issue rate reductions that reflected their "windfall" savings from the corporate income tax rate reduction. Tampa Electric Co., Duke Energy, and Gulf Power Co. are among those that passed on tax savings to customers.

In April 2018, the PSC ordered Gulf Power to pass $103.2 million in tax reform savings to customers, adding $9.6 million to that amount on Oct. 30, which will allow residential ratepayers to see a monthly bill reduction of $1.11 per 1,000 kWh beginning in January.

FPL, however, estimated its savings would be $684.8 million a year from the TCJA, which would fall below the 11.5 percent threshold requiring a windfall reduction in rates and said it would use those savings to defray costs from Hurricane Irma.

Hurricane Irma barreled across much of the state on Sept. 10, 2017, causing more than 4.4 million FPL customers to lose power. About 28,000 workers from 30 states and Canada were contracted to restore electricity, FPL maintains.

In December, the OPC, FRF, and the FIPUG filed a petition with the PSC demanding "fair, just, and reasonable rates" be charged by FPL, claiming the utility was not accurately reporting its revenues or its TCJA tax savings.

According to OPC's December petition, FPL is actually recouping an estimated $736.8 million in savings a year—now calculated to be $772 million—which would boost its return on equity beyond 13 percent.

FPL challenged the petition, initiating a series of hearings that resulted in a  unanimous decision in May by the PSC, which issued a formal order ratifying the ruling on June 10.

"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 PSC 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 over-earning."

Published under: Florida , Hurricane Irma