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LCEC asks PSC to dismiss city petition

By Staff | Apr 12, 2016

Updated with comment from the city:

Saying the city of Cape Coral has failed to make its case for Public Service Commission action in regards to its rate structure and other issues, LCEC has asked the state regulatory agency to dismiss the complaint.

… “LCEC respectfully requests that the Petition be dismissed with prejudice for lack of jurisdiction and/or for failure to state a claim upon which relief may be granted, and the immaterial, impertinent, and scandalous allegations described above be struck from the Petition,” the 20-page motion filed late Tuesday concludes.

“The motion to dismiss was based on the numerous facts stated in our response,” LCEC spokesperson Karen Ryan said when asked why the co-op’s response to the city complaint was to seek its dismissal.

City officials said the filing was not unexpected.

“We expected LCEC to file the motion to dismiss, and we will respond accordingly,” city spokesperson Connie Barron said.

The city has seven days to respond.

The city complaint filed March 15 asks the PSC to require the electric co-op to conduct a cost of service study justifying its current rate structure, which the city maintains is “unfair, unjust, unreasonable and discriminatory” based on the city premise that Cape Coral ratepayers are subsidizing ratepayers in other areas served by LCEC because the city has more ratepayers per mile.

This complaint should be dismissed for three primary reasons, the LCEC filing states:

* “First, while the relationship between classes of customers is within the Commission’s rate structure jurisdiction, the City’s proposal to create a conceptually new, geographic-based class of customers is a fundamental shift in cooperative policy that has the potential to cause harm to all members; thus, it must be reserved to the business judgment of the cooperative and its member-elected Board of Trustees.

* “Second, the burden is on the City to justify why this fundamental shift in policy to a new City-only customer classification system is in the public interest, and the City has not met that burden.

* “Third, the City has no standing to assert rate structure claims and demand fundamental shifts in cooperative policy on behalf of other inhabitants and businesses located within its municipal boundaries. Therefore, a demand for LCEC to undergo the extraordinary expense to study the City’s unorthodox proposal presents a claim upon which relief cannot be granted.”

The LCEC motion to dismiss also targets information the city provided to the PSC.

… “the City makes several allegations that are based on Commission rules that have been repealed, as well as misleading and inflammatory statements regarding Florida statutes outside of Chapter 366 that have nothing to do with rate structure. The Commission should strike those improper allegations,” the motion to dismiss states.

The LCEC filing Tuesday is the latest in a series of exchanges that began last year at the start of a process that has taken two directions: The negotiation of a new franchise agreement between the city and LCEC to replace a 30-year old contract that will expire this year and the exploration, on the city’s part, of possible purchase the co-op’s infrastructure within the city and the creation of a municipal electric utility or some city-controlled hybrid.

The current franchise agreement opens the door to purchase but each side takes a different view as to what such a transaction would require, specifically whether the franchise agreement overrides what LCEC says is a state-required vote of all co-op members system wide.

Meanwhile, the city has taken the position that in-city ratepayers are “subsidizing” other ratepayers throughout LCEC’s five-county service area, adding there is precedent for density-based rate structures.

The LCEC motion to dismiss maintains those arguments are not valid, that both the PSC and the courts have consistently found, since the ’80s, that geographic or density-based methodologies are discriminatory. What’s more, any creation of what would constitute a “new customer class” would need to be made by LCEC’s elected board.

“There are over 3,100 electric utilities in the United States, over 900 of which are electric cooperatives,” the motion to dismiss states. “The City can only point to a handful of out-of-state electric utilities that employ any kind of geographic based rate structures. The paucity of the City’s own data supports the conclusion that geographic based rates are not standard industry practice.”

If applied, density-based rates would have a ripple effect as they would have to be applied across the board, LCEC states.

“If LCEC were to grant a preference to the City because of density considerations, it would have to grant the same preference to other areas similarly situated. This could produce an enormous number of rate zones which would be virtually impossible to administer,” the motion to dismiss states.

It is for this reason that the Florida Electric Cooperatives Association Inc., asked last week for “person of interest status” concerning the city complaint.

“The issues in the above-referenced docket are of interest to FECA’s members by potentially adversely changing the formula used to determine fair and reasonable rate structures,” the FECA letter filed last Tuesday states.

FECA is a not-for-profit representing 15 electric distribution, and two generation and transmission, cooperatives collectively serving more than 1 million consumers in 57 of 67 Florida counties.

The PSC granted the its request for person of interest status meaning FECA will be copied on all filings and other correspondence from the city and LCEC, including any pleadings, motions, notices and orders.