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City asks PSC to let it make its case

By Staff | Apr 20, 2016

The city of Cape Coral has asked the Public Service Commission to let it present its case before making a decision on LCEC’s motion to dismiss the city’s petition asking for an investigation into the electric co-op’s rate structure.

In a pair of filings made Tuesday, the city’s special utility counsel, Brian P. Armstrong, made a request for oral arguments and also asked that an administrative hearing be held if and when LCEC is ordered to provide the cost-of-service information the city has requested.

“The City believes that oral argument on the matters raised in the above-referenced pleadings will assist the Commission in its deliberations by providing a more complete presentation of the relevant facts and authorities as they bear on the matters at issue,” the first request states. “Oral argument would also provide the Commission with the opportunity to request clarification, as necessary.”

Armstrong also submitted a 23-page response to LCEC’s April 12 motion to dismiss. In the document the city maintains that there is long precedent for PSC-ordered geographic rate studies; that the electric cooperative, in its motion to dismiss, has acknowledged the city’s premise that ratepayers within the city subsidize those in other areas of the co-op’s service area; and that LCEC’s refusal to provide the requested rate study plainly puts the matter within the PSC’s purview.

“LCEC’s motion makes clear that LCEC has no intention to perform the cost of service study requested by the City. The City’s petition presents issues ripe for Commission consideration at this time,” Armstrong’s response states, adding that “many, many millions of dollars are at issue.”

Once the requested study is complete, the city also wants the PSC to schedule an administrative hearing so that the commission can remedy the financial “injury” caused by a current rate structure that forces customers within the city to subsidize others in “far flung areas in the rest of LCEC’S 2,100 square mile service territory.”

“The City represents 45 percent of LCEC’s customer base,” the response states. “LCEC refuses to identify to the City how much of its more than $400 million of annual revenue is obtained from LCEC service within the City. Assuming that the revenue derived from LCEC service within the City is approximately 45 percent of LCEC’s total revenue, LCEC receives approximately $180 million every year from the City, its inhabitants and businesses. Thus, even a 10 percent difference in LCEC’s cost to provide electric service in the City, if reflected in a separate rate classification and corresponding rates, could save the City, its inhabitants and businesses $18 million a year; and $540 million over the course of a 30 year franchise term.”

LCEC officials reached Wednesday morning said a brief review of the city response shows little information that is new.

“It appears they are still referencing the case from 1957 and did not add much to their response,” LCEC spokesperson Karen Ryan said. “We anticipated that they would respond to our motion to dismiss. We believe that we have made a strong argument for dismissal and we continue to stand by what we stated in our motion.”

The city’s 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. One is the negotiation of a new franchise agreement between the city and LCEC to replace a 30-year-old contract that will expire this year. The other is the exploration, on the city’s part, of the possible purchase of the co-op’s infrastructure in the Cape 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, in March, the city asked for PSC intervention, asking the state commission to order LCEC to conduct a city-specific cost-of-service analysis to determine whether Cape ratepayers are, in fact, subsidizing other ratepayers throughout LCEC’s five-county service area. The city maintains LCEC’s current, uniform rate structure is “unfair, unjust, unreasonable and discriminatory” to customers in the Cape because there are approximately 750 customers per mile here as compared to an average of 55 customers per mile in the more rural areas LCEC serves. The city says there is precedent for rate structures based on population density.

The LCEC motion to dismiss filed on April 12 states 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; that, if applied, such rates would have to be applied uniformly, producing “an enormous number of rate zones which would be virtually impossible to administer;” and that any creation of 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” must be reserved to the cooperative and its member-elected Board.

In its response filed Tuesday, the city said the PSC not only has the ability to take action, but the responsibility to do so.

“…The Commission is empowered by the Legislature to add a new customer service classification to LCEC’s rate structure and the Commission’s failure to require a cost of service study necessary to establish LCEC’s cost of serving within the City injures the City, its inhabitants and businesses every day that an apparently unfair and discriminatory rate structure remains in place..,” the city states, in part.

State statute does not provide a deadline by which the PSC must rule on the motion to dismiss, Public Service Commission officials said Wednesday.

If the Commission decides to allow oral argument, the city and LCEC will present their respective arguments at the Commission agenda conference scheduled to consider the motion to dismiss.