Power companies tap tax cuts to pay storm costs

Power companies tap tax cuts to pay storm costs

News Service of Florida
News Service of Florida
May 22, 2019

The settlements, which combine to total $575 million, were reached after negotiations between the utilities, the state Office of Public Counsel, the Florida Retail Federation and the Florida Industrial Power Users Group. The Office of Public Counsel represents consumers in utility issues, while the business groups represent major commercial electricity users.

The agreements are part of a broader picture about how utilities are using savings from a 2017 federal tax overhaul, which cut the corporate income-tax rate from 35 percent to 21 percent. In the past, utilities have regularly been allowed to tack extra charges onto customers’ bills to recoup storm-related costs. Applying the tax savings avoids the added storm charges.

The settlements, approved unanimously Tuesday by the Florida Public Service Commission, include Duke using $484 million in tax savings to cover restoration costs from 2017’s Hurricane Irma and Hurricane Nate and to replenish a storm reserve, according to the commission. Tampa Electric, meanwhile, will use $91 million in tax savings to cover the costs of  Hurricane Hermine and Hurricane Matthew in 2016, Hurricane Irma and two tropical storms.

Determining costs for restoring electricity after hurricanes and major storms is a complicated process, in part because of issues such as utilities bringing in crews from other parts of the country. The settlements also include a series of changes to try to improve that process in future storms --- an issue that drew heavy discussion during Tuesday’s commission meeting.

Jeff Wahlen, an attorney for Tampa Electric, told the commission the negotiations included “spirited debate,” with the settlements aimed at avoiding future cost disputes.

“For the last 18 months, we have been sparring with the consumer parties on dozens of issues, some big, some small,” Wahlen said. “We fought over documentation, we fought over substance of what should be recoverable. We debated processes and procedures, and it was grueling and tough on everyone involved.”

After the votes, Public Service Commission Chairman Art Graham issued a statement describing the settlements as being “in the public interest because they reduce storm cost recovery for customers and implement processes and procedures that will continue to benefit customers.”

In addition to covering the storm costs, Tampa Electric also will refund $11.5 million to its customers in January, according to the utility, which has about 765,000 customers in the west-central part of Florida. Duke has about 1.8 million customers in a broader swath of the state.

Tuesday’s vote came a week after the Public Service Commission approved a plan by Florida Power & Light to use as much as $1.3 billion in federal tax savings to cover Hurricane Irma restoration costs. That plan, however, was far more controversial and did not involve a settlement.

Duke also has a proposal pending at the commission to use tax savings to cover power-restoration costs from last year’s Hurricane Michael.

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