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PSC filing under review

By Staff | Mar 18, 2016

The state Public Service Commission has received the city of Cape Coral’s rate structure complaint and assigned it for review.

“This petition just came in, and has just been assigned to legal staff,” Bev DeMello, Office of Consumer Assistance & Outreach, said in an email response Thursday to the question of how such filings are processed. “They are currently reviewing the filing and will determine how to proceed.”

The agency has provided a “notice of complaint” to the electric co-op that services the city, advising that LCEC can file a response to the Office of Commission Clerk.

At the recommendation of its special utility council, Brian Armstrong, Cape Coral City Council on Monday voted 6-1 to file the petition so as to get cost of service analysis data the city maintains it has been unable to obtain from LCEC. The city says it needs the information to conduct its due diligence pertaining to either a new franchise agreement with the utility or a purchase of assets as allowed by the current agreement set to expire later this year.

Councilmember Marilyn Stout cast the lone dissenting vote. Councilmember Rana Erbrick was absent.

The petition/complaint filed with the state Tuesday asks for an investigation into LCEC’s rate structure. The 28-page document states the city has filed against LCEC “for its discriminatory, arbitrary, unfair, unjust, and unreasonable rate structure” and “petitions the Florida Public Service Commission (‘Commission’) to investigate said rate structure as adopted in LCEC rate schedules on file with the Commission.”

The city asks the state regulatory agency for three things in its “request for relief:”

* “Require LCEC to conduct and file, on an expedited basis, a fully allocated cost of service study which justifies its current rate structure and rate design, including, but not limited to justification for its use of uniform rates and charges for in City and out of City service, including CIAC charges, and LED lighting charges that disproportionately impact the City, as well as inhabitants and businesses located within Cape Coral’s municipal boundaries.”

CIAC charges are “cost in aid of construction,” fees for such things as line extensions to a house or business where poles and lines do not exist.

LCEC’s CIAC policy has been in effect for approximately 10 years, utility officials said.

* “Initiate a hearing process on an expedited basis for review of LCEC’s cost of service study by the Commission as well as the City of Cape Coral and other interested persons impacted by LCEC’s current unfair, unjust, unreasonable and discriminatory rate structure.”

*”Order such other relief for the City of Cape Coral, its inhabitants and businesses as the Commission may deem just and proper.”

“This action was prompted by LCEC’s refusal to provide financial information that is necessary to conduct our due diligence to evaluate our options related to electric service,” said City Manager John Szerlag in a prepared statement issued after the council action.

“We already know our residents pay well above $30 million more each year (17 percent) for the same electricity as our neighbors across the river served by FPL,” Szerlag said. “Our residents also should know whether or not they are being charged higher electric rates to subsidize less-populated LCEC service areas.”

According to the city, “As of 2013, Cape Coral had 746 customers per square mile within its municipal boundaries, which represent only 5 percent of LCEC’s 2,084 square miles of service territory. The remaining 1,965 square miles of LCEC’s service territory had only 55 customers per square mile. The complaint filed with the PSC asserts that LCEC’s current rate structure discriminates against the City of Cape Coral and all residents and businesses within the City’s municipal boundaries.”

The city maintains that not only has LCEC failed to provide requested and necessary information but that the co-op has been uncooperative as well.

“We were optimistic we could work in tandem with LCEC to share information, evaluate the options, assemble a citizen committee to review the options, and then make a recommendation to City Council,” Szerlag said. “Unfortunately, we could not get beyond the information sharing stage to move forward.”

LCEC has a different view of how discussions with the city have progressed and the co-operative’s response to records requests. They point out that the utility put a starting point franchise agreement on the table nearly a year before receiving a counter from the city last week, just before the Council filing vote that was set for Monday. LCEC also said the co-op has provided all information requested that was 1) available and 2) non-proprietary.

LCEC officials said Thursday the co-op could not comment specifically on the PSC filing as it has not had time to review the document.

Officials did express disappointment at the decision to file.

“The PSC will determine its ruling in due course but what is most disappointing to LCEC is that after a year of waiting to hear back from the City, meaningful negotiations have now stopped in their tracks before they could begin,” said Karen Ryan, LCEC spokesperson. “We are unable to have earnest negotiations toward a mutually beneficial agreement until the City’s complaint is resolved because it deals directly with issues that are relevant to the franchise agreement.”

She did address the city’s request for a geographic cost analysis limited to ratepayers within the municipal boundaries.

“The City is asking for a special cost of service study for the City only. That may sound simple, but it is a very complicated, time-consuming, expensive process that doesn’t really have meaning,” she said in an email response.

“The City’s complaint is based on setting up a special rate based on geography and population density assuming that customers in rural areas should pay higher electric rates. This is unprecedented in Florida and is the opposite of how the City runs their own water utility rate structure. There are parts of Cape Coral that are less dense and less populated than others but everyone pays the same rate for water.”

LCEC?officials have previously pointed out that the co-op began to serve the Cape, providing all of the utility infrastructure, in its early development days when the community had virtually only a handful of homes and few businesses.

LCEC did agree with the city on one point – the co-op also would prefer a co-operative relationship.

“We advised City staff leaders and their legal consultant that a petition of this sort will require a significant investment in legal and consulting fees,” LCEC Executive Vice President and CEO Dennie Hamilton said in a release issued by LCEC prior to the council vote. “The only people who will benefit from this strategy are lawyers and consultants.”

“We are disappointed that efforts and resources continue to be aimed at litigious activities rather than focusing on the negotiation of a new franchise agreement,” Hamilton added. “We stand ready to work together with City leaders to negotiate an agreement that is in the best interests of our members in the City, and we hope such negotiation can begin soon.”

Council discussion, if any, on its complaint and filing with the Public Service Commission will remain public.

In response to a council member query as to whether council discussion could take place privately or “in the shade” both City Attorney Dolores Menendez and Armstrong recommended against closed meetings at this time.

While “shade” meetings are permitted when matters discussed relate to pending litigation, such meetings are narrowly defined and must be related to settlement or strategy related to legal expenditures, the opinions state.