The politics of distraction at the PSC

With FPL’s billion dollar rate case hearings ending Friday, one thing has become abundantly clear as you look over the issues that were given extra time during the life of the case. The Public Service Commissioners, intervenors, and media had a bad habit of dwelling on the issues that don’t actually make a difference for customer’s bills. Whether it’s questions about the intentions of customers at quality service hearings, rate case expenses, corporate jets, or executive bonuses, politics is usually what plays a role in highlighting these issues.

The latest flare up stemmed from an anonymous letter sent to the PSC that showed a grid indicating that FPL worked to turn out customer to speak positively about FPL in service quality hearings earlier this year. FPL confirmed that they did attempt to get as many people out as possible with positive comments so that Commissioners could hear from customers with good experiences. The interesting twist was that the Florida Retail Federation, who I’ve written about before, and AARP were doing the exact same thing. So all it compares to is the opposing sides in a political campaign turning out their supporters.

This is exactly the type of issue that the media jumps all over, and several commissioners showed a strong interest. Commissioner Nathan Skop, Commissioner Nancy Argenziano and intervenors asked how much staff time and thus rate payer dollars were expended by FPL in this process, but it ultimately amounted to very little at all. Commissioner Argenziano’s pin messages even showed a near obsession that she had with addressing the problem, but for all the attention to this matter in the past week, it basically has no financial impact on customers, nor was it illegal in any way. The only thing it accomplished was serving as a major distraction – with very suspect timing – at the end of the rate case. With all that has happened regarding quality service hearings, they should probably just do away with them to avoid future politicization.

As another example, elected officials can be just as guilty. On Friday, State Representative Mark Pafford filed legislation to require those who testify in front of utility regulators to reveal their ties to utility companies. This is just the type of “feel good” legislation that is great for a politician’s re-election campaign, but it accomplishes little for constituents. Wouldn’t it be better to file legislation that reforms the PSC as a whole instead of this narrow focus, or more importantly file an economic stimulus package or some other job creation bill during these tough economic times?

Many have also been upset about the $3.6 million in rate case expenses such as legal costs, consultants, lodging, travel and meals, FPL budgeted and customers would have to pay for. And because the hearings have dragged on longer than previously anticipated, the expenses are expected to balloon to $5 million with FPL covering any amounts over $3.6 million. If customers have to pay any of it, then there should at least be some kind of cap on the budget set by the PSC depending on the number of customers a company has. For all the focus it fairly received, you would think this would have a huge effect on a customer’s bill but it ends up having little financial impact because it’s a miniscule amount in the overall rate case.

There are similar points with executive compensation and corporate jets. After the big three auto CEOs went to Congress on private jets, and executives at companies bailed out by the federal government during the global economic crisis received lavish bonuses, the public is naturally sensitive. Unfortunately for ratepayers, unequal media attention and interest from intervenors and commissioners alike, have allowed for FPL’s use of corporate jets and performance based bonuses for its executives to distract heavily from the rate case. To that end, FPL agreed to remove $16 million in aviation costs and $37 million for executive compensation from the rate request, which was unfair to include and not very smart to make customers pay in the first place. While this deservedly frustrates customers, the dollar amounts are a small portion of the overall request and little impact on a customer’s bill.

You might ask why issues like this receive the most attention. The answer is simple. Politics.

From intense media scrutiny to statewide elected officials applying pressure, the politicization of the rate case has resulted in three negative effects. The first effect is the public has a fundamental lack of understanding for the complex financial issues that are the underlying driver for FPL’s performance as a company. Equity ratios, cost reduction, depreciation, financing costs, facility maintenance and overall operational efficiency aren’t exactly the most exciting of issues – possibly explaining the media’s lack of attention – but they are the real indicators to be considered by the PSC and public at-large.

The second effect is a high proportion of the rate hearings being dedicated to hot button political issues and taking away from the important financial benchmarks listed above. Furthermore, it has resulted in a prolonged case that caused increased costs for both FPL (ratepayers) and the PSC (taxpayers). For this reason alone and seeing that the hearings are now complete, the PSC should not delay its decision as previously requested by Governor Crist. The third and final risk is that commissioners will ultimately make a political decision, not one based on the financial evidence and cold hard facts that have far more affect on the rates that consumers actually pay.

Politicians, the media and several PSC commissioners broadcast an image of looking out for consumers and they mean well. But sometimes their actions and attentiveness actually make the case even more difficult to solve. With all the focus on who is attending service hearings or flying on corporate jets, the details of salaries or other expenses that have little effect on the bottom line – combined with the perception of coziness to utilities – has allowed for grand standing to get in the way of what is truly important to the ratepayer. And that is the factors that will ultimately impact how much their bill is.

With all that has transpired, I am still hopeful that Commissioners Lisa Edgar, Matthew Carter, Nancy Argenziano, Nathan Skop, and David Klement (replacing Katrina McMurrian) will make their decision based on that evidence, and that evidence alone.

« Who’s driving the drilling debate?