TALLAHASSEE — Tampa Electric struck a deal late Friday afternoon with groups opposing its requested 10-percent rate increase and agreed to spread smaller increases over the next four years.
The compromise includes an initial hike of 5.5 percent starting Nov. 1, which means a typical customer using 1,000 kilowatt hours a month would pay an extra $5.67, up from $102.58 to $108.25.
The original request, which would have generated an additional $134.8 million a year for TECO, would have meant an extra $10.41 on the same bill.
Total rate increases over the four years will garner $180 million, as opposed to $536 million under the original proposal, saving TECO customers $356 million.
“At the end of the day, this is a fair deal for ratepayers,” Florida Public Counsel J.R. Kelly, the state’s utility watchdog, told the Tribune. “It’s a much lower hit, and we were glad to put our name on it.”
Kelly had joined with groups representing industrial, retail and hospital interests to oppose the increase.
The proposed settlement agreement still must be approved by the Public Service Commission, the regulators who review and approve utility increases. The board had scheduled a weeklong hearing next week in Tallahassee.
TECO now asks that commissioners still convene on Monday to discuss scheduling another hearing to consider the proposed settlement.
Under the proposed settlement, rates would rise again in November 2014 to generate another $7.5 million, and again in November 2015 for another $5 million.
As part of the deal, the parties agreed TECO may charge customers an extra $110 million in 2017 to pay for improvements at certain power plants to make them more efficient.
But TECO is barred from requesting any more rate increases until the beginning of 2018.
The settlement does not include increases for fuel and other charges, which the PSC will decide in November, a TECO press release said.
When including those extra costs along with the new rates, the average residential bill could bump up another $1.27, to $109.52.
“We are pleased to reach agreement with groups representing all our customers,” said John Ramil, president and CEO of TECO Energy, Tampa Electric’s parent company.
The negotiations were “characterized by give-and-take on all sides,” said Jon Moyle, attorney for the Florida Industrial Power Users Group. “It’s a fair deal that provides certainty and predictability for our members and other businesses.”
The investor-owned company asked for the increases because it isn’t making enough money.
“As all of the Florida utilities have experienced, the pace of the economic recovery has not been what any of us predicted,” TECO president Gordon Gillette wrote in a February rate increase request.
Revenues for 2014, the first year for which the 10-percent increase would have taken effect, were projected at $908 million – not counting the increase. That’s a 6.4 percent drop from the $970 million made in 2009, the last time TECO was authorized to raise prices.
With the 10-percent rate increase, TECO could have made $1.04 billion in 2014.
Florida overall has “moderately expensive” electricity, according to the Institute for Energy Research, about 16 percent above the national average. That’s largely because of air-conditioning use and electric heat.
And the state’s power plants mostly use natural gas, which is more susceptible to price fluctuations than other fuels, according to a University of Florida study.
Nonetheless, said TECO spokeswoman Cherie Jacobs, “while the cost of everything else has gone up, from gasoline to groceries, your Tampa electric bill has gone down.” Based on PSC records for 2010, a typical electric bill for a TECO residential customer using 1,000 kilowatt hours was $110. In 2011, it was $104.34, and in 2012, that figure was $104.23.
But TECO’s average annual residential consumption also is decreasing. After growing 5.2 percent in 2010, it shrank 5.8 percent in 2011 and another 4.9 percent in 2012, PSC records show.
Nationally, overall energy consumption tripled over the last 60 years, according to the U.S. Energy Information Administration. In 2009, it decreased across the board by nearly 5 percent, the largest single-year drop since 1949.
Mark Cooper, a senior research fellow at Vermont Law School’s Institute for Energy and the Environment, said it’s utilities’ job to realize when there’s going to be less demand and plan accordingly.
“They need to ask what assets they can take off the books to make up for that (reduced demand),” he said, referring to underused power plants and agreements to buy extra power from other companies. “You have to match the assets that create the costs to the demand that is changing.
“The customer should see the full benefit of a reduction in demand,” Cooper added. “They should be rewarded for, say, replacing their air conditioner with a more efficient unit. Regulators should be asking utilities what they’re doing to match assets to demand. We need to shift the burden on to the utilities.”