February 1, 2009

Progress Energy Debacle

Published in the Citrus County Chronicle on 1 February, 2009.

A good example of what has happened to the average rate payer for electricity provided by Progress Energy is found in our own most recent electric bill. As a family, we have been trying to conserve energy, and our electric consumption was lower this past billing period compared to the same time period a year ago, yet our bill reflected a 26.7% increase. Estimates for electric rate increases for the average rate payer, range between 25% to 31%. We recognize a portion of the increase came from an increase in fuel costs, however, the remainder (and the bulk of the charges) are attributable to the preconstruction costs for the nuclear power plant. Estimated cost for the new power plant is $16 Billion.

To review general public reaction to the increased electric charges I have compiled the following:

• There have been numerous letters to the editor and sound offs published in the Citrus County Chronicle, and the rate payers serviced by Progress Energy are up in arms.
• Rate payers view what has happened as patently unfair. Terms like "Taxation without representation" are being used.
• Petitions are being circulated and signed by rate payers in the areas serviced by Progress Energy, demanding the repeal of s366.93.
• Expressions of outrage that this rate hike couldn't have come at a worse economic time for the rate payers here in Florida. In Citrus County the unemployment rate is one of the highest in the state, creating a huge increase in requests for food and clothing assistance from the local residents. In addition, it should be noted, a large percentage of our residents are retired, on fixed income, and are struggling to pay this increase as well. (Note: Senator Bill Nelson's office has confirmed a significant increase in requests for assistance to his office for help in paying electric bills and prescription costs.)
• Questions are being raised as to whether Progress Energy, a privately owned corporation with stock holders, made any efforts to secure private financing for these preconstruction costs? If yes, why didn't they follow that course of action, or, were they turned down? If so, and they couldn't secure private financing for these costs, why should the rate payers bear the risk and foot the bill? If they made no effort to secure private financing, then why not?

Significant incentives were provided in the 2005 Energy Policy Act enacted by Congress providing loan guarantees and tax credits to be specifically provided to the first 6 power plants to be built, the proposed power plant in Levy County qualifies for these incentives.

• Has Progress Energy taken advantage of these loan guarantees at the Federal level, or did they only pursue the "preconstruction cost recovery plan" with our State lawmakers?

Progress Energy is a privately owned corporation with stock holders, yet the rate payers are footing the bill and taking on the risk for a power plant that may, or may not be built; and if the plant is not built, Progress Energy gets to keep all the money they charged in increased rates. Where is the accountability to the rate payer? An example of genuine frustration was shared with me on a recent visit to my doctor: He said, "Just imagine a local fast food restaurant makes the decision to build another restaurant on the other side of the county, and in order to pay for the new restaurant, the corporation decides to increase the price of all the food at the existing restaurant. What most people would do, would be to go to their competitor for lunch, wouldn't they? Well, in the Progress Energy case, because they are a monopoly, we don't have any other choice, but pay. " His demeanor was decidedly unhappy.

• Concerns have been raised as to the constitutionality of this law. Specifically, as to the authority our State Government to enact legislation enabling electric rate increases to a private corporation with stock holders, for preconstruction costs for a power plant that may or may not be built, and a service the rate payers may or may not receive.

Keeping all this in mind I would like suggest a few ideas I have that might help remedy the current situation.

1. Legislation should be sponsored by our lawmakers to revise s366.93, Chapter 230; the law governing the shifting of the costs to the rate payer, to prohibit the costs related to preconstruction of nuclear /integrated gasification combined cycle power plants from being passed on to rate payers prior to completion, activation, and electricity provided to the rate payers. Payments already made for the preconstruction costs by the rate payers: (1) Should be reimbursed; or (2) Should be applied to the next billing period for the rate payers, as a credit towards their balance.
2. In addition, this law should be further clarified to provide that preconstruction costs for a new power plant, incurred by an electric utility, be part of the electric base rate charge increase at the time such power plant is activated and electric service is provided by the power plant to the rate payers.
3. In addition, this law should be revised to provide for the following requirements upon the electric utility.
   1. The electric utility should be required to provide the rate payers with the ability to plan in advance for the increased costs associated with the construction and activation of a new nuclear power plant; the electric utility should be required to publish, and notify the rate payers the following information by a date certain that will coincide with the end of the current 2009 legislative session. This information should include, but not be limited to:
      • All projected and/or estimated electric base rate increases per 1,000 kilowatt hour including the overall % increase anticipated, that the rate payer can expect to pay when the new power plant is activated and electric service is provided by such power plant to the rate payers.

The situation we find ourselves in, provides us a great opportunity get involved and let our wishes known, and, at the same time, help our elected officials in Tallahassee craft the best laws for all the people in Florida.

Suzan Franks.