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City submits additional documents to support PSC complaint

By Staff | Apr 1, 2016

In support of its filing with the Public Service Commission requesting an investigation into LCEC’s rate structure, the city of Cape Coral has submitted documentation to show that different rates, based on population density, have applied in the past.

According to the filing submitted to the PSC Thursday by the city’s special utility counsel, Brian Armstrong, Florida Power & Light, the utility from which LCEC buys the electricity it supplies throughout its five-county distribution area, FPL noted a tiered rate structure for residential customers in a proceeding filed with the then Florida Railroads and Public Utilities Commission in 1957. The filing was to fix its rates and charges.

That FPL document outlined three residential rates – RS-1 for ratepayers within large municipalities, RS-2 for ratepayers in smaller municipalities and RS-3 for ratepayers in unincorporated areas.

The city’s intent in submitting the old FPL order is to confirm what it says is a precedent for density-based rate structures and to confirm that utilities have – and can – break out costs according to unique areas of service, Armstrong said in his cover letter to the PSC.

“This information was filed with the PSC in support of the City’s position that electric companies not only have the ability to set rates based on the cost of service to a unique geographic area, but the practice has been used in the past by other electric providers such as FPL,” said city spokesperson Connie Barron on Friday.

While declining comment on the city’s complaint update as the had not yet received the documents, utility officials said Friday they know of no such residential rate structure currently in use in Florida.

“I know we have researched it and have not been able to find any utility in the state of Florida that has rates based on geography,” LCEC spokesperson Karen Ryan said.

The cover letter submitted by Armstrong details the city’s position:

… “This order is submitted as confirmation of precedent for establishing rate structures in the manner suggested by the City of Cape Coral in its complaint and petition in this docket; rate structure should reflect the unique circumstances in the Cape Coral/LCEC relationship which likely produce disparate costs of service for the City, its residents and businesses (for the reasons discussed in the petition). Of particular note, in addition to the widely disparate number of customers per mile served (approximately 750 customers per mile in the City compared to only approximately 55 customers per mile served by LCEC in the remainder of its 2,100 square mile service territory), it must be considered that LCEC is a distribution only utility; no generation assets exist as FPL provides 100% of the electricity used in the City of Cape Coral; LCEC is only a middleman. Moreover, the LCEC service territory is comprised of two

separate, non-contiguous areas with the City of Cape Coral in the northern, more populated portion.

“Finally, this order confirms that it is possible for an electric utility, any electric utility including a rural, not for profit electric cooperative, to perform cost of service studies for service within cities as well as outside of cities. Please note that at one time, FPL performed cost of service studies for service within each large city, small city and the entirety of the remaining unincorporated areas which it served…. “

The letter also states the PSC “required another electric cooperative to perform and submit for review cost of service information necessary to substantiate its rate structure for contributions in aid of construction collected by such utility” and so “should do no less for the City of Cape Coral, its residents and businesses so as to insure that no unreasonable or discriminatorily high rates are being charged to them.”

The city of Cape Coral’s franchise agreement with LCEC expires this year. That 30-year-old agreement includes a provision that allows the purchase the utility’s assets in the city and the city staff began last year to request information it says it needs to evaluate that option.

LCEC, meanwhile submitted a “boilerplate” franchise document for consideration, also last year.

The process has been bumpy.

The city maintains LCEC has been non-responsive to its information requests; LCEC maintains it has supplied all available non-proprietary information while it took the city a year to provide a franchise counter.

The information requests issue is now under consideration by the state regulatory agency.

The city of Cape Coral’s complaint, filed March 15, asks the Public Service Commission to “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.”

The complaint also asks the PSC to “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” based on the city premise that ratepayers within the city are subsidizing ratepayers in other areas served by LCEC because the city has more ratepayers per mile.

LCEC has maintained that breaking out its rate structure according to density would be too difficult and is not a commonly applied methodology.

In response to a question from The Breeze, the PSC previously stated that no utility in the state has a sliding rate structure for residential customers.

“All customers of a utility, no matter where they live, pay the same rates. Franchise fees, and taxes may vary by region, but not electric rates,” the PSC said via email.

The city’s March 31 update may be found at

www.psc.state.fl.us/library/filings/16/01677-16/01677-16.pdf