Public Service Commission Approves Gulf Power Rate Compromise

Apr 4, 2017

Credit Gulf Power Company

After rescinding its original $107 million rate hike request, Gulf Power Company’s compromise plan has received unanimous approval from the Public Service Commission. 

The settlement, crafted by Gulf Power, the Office of Public Counsel and other interested parties, goes into effect on July 1. Jeffery Stone is Gulf Power’s General Counsel, and had praise for the PSC staff.

“The pre-hearing process was better than any case that I’ve ever been associated with,” said Stone. “It was largely as the result of that pre-hearing process that enabled the parties to get close enough that they could actually see a light at the end of the tunnel.”

At issue was the utility’s request to raise its fixed charge rate, from $18 to about $50  per month per household, regardless of how much power is used. Gulf Power said the proposed rate increase was needed to upgrade and maintain power for customers.

“That was all taken out; that was, in my opinion, a big win for consumers, and a big part what we negotiated into this agreement,” said J.R. Kelly with the state Office of Public Counsel,which represents customers in utility cases.

That part of the proposal drew the most fire from those attending public hearings in Pensacola and Panama City.

“We heard many, many comments about how that was going to adversely impact consumers, especially those that use less energy; low-income, and people on [a] fixed-income.”

Currently, the average Gulf Power customer pays an average of $144 per month. The original increase would have pushed that to $158. Under the compromise, the same bill will increase to $151 a month – less than the amount paid in 2015.

Gulf Power's original $107 million base rate request now falls to $62 million through the end of 2019. The company projects the net impact to customers would come to just over $54 million. The issues, Kelly says, were myriad and complex, including the revenue requirement.

“In this agreement, we finally decided on a $56 million revenue requirement,” Kelly said. “But there were a couple of other things added in there that actually brought the $56 million down to $54.9 for the next two and a half years.”

One issue not negotiated was the Return on Equity, which will remain the same as passed in 2012. Another agreement involves Gulf Power adding to its rate base Georgia Power's Scherer Plant Unit 3 near Macon. Gulf Power owns a fourth of the plant. Kelly says the utility agreed to a $32 .5 write-down off the plant’s balance – which will not be passed on to customers.

Gulf Power President and CEO Stan Connally.
Credit The Southern Company

In a written statement, Gulf Power President Stan Connolly said the compromise is “good for all involved, including Gulf Power’s customers.” He went on to say that the deal supports the utility’s current investment in infrastructure, which is aimed at long-term service with a mix of energy across the service area. In the agreement, Gulf Power's original request for a $107 million base rate increase would fall to $62 million through the end of 2019. However, the company projects the net impact to customers would come to just over $54 million.

“I’ve been a Gulf Power customer for almost 25 years, and rate increases seem to happen every couple of years or so and I never recalled another rate increase getting this much attention,” said Christian Wagley with the group 350 Pensacola, which opposed the original request.

He says to see the full benefit of the compromise, you have to look past the number on the average per-month bill.

“The original proposed rate structure would have put that high base charge on people and remove their ability to control their own bill,” Wagley said. “By sticking them with that high initial charge you really would have discouraged energy conservation. And ironically, encourage people to use even more energy; which is not a good thing to do.”

Prior to Tuesday’s appearance before the PSC in Tallahassee, public hearings on the request were held in Pensacola and Panama City, with the majority of speakers opposed to the hike. Wagley feels that could affect Gulf Power’s future rate requests.

“I can’t help but think it will make Gulf Power Company aware that people are paying attention,” said Wagley. “They do like to have the ability to control their [electric] bill by living conservatively, investing in conservation; and when you take that control away from people, they certainly don’t like that.”

Also signing and supporting the agreement were the Florida Industrial Power Users Group and the Southern Alliance for Clean Energy. No other objections were raised to the settlement proposal by other parties involved in the case, including Walmart and the Sierra Club.