State regulator calls for review of FPL flights, costs

Sep 18, 2009

Josh Hafenbrack and Julie Patel

South Florida Sun-Sentinel


A state regulator called for an independent financial audit into Florida Power&Light Co.'s use of corporate jets, an emerging flashpoint in the lengthy, high-profile fight over the utility's request for a record rate increase.

The state's Public Service Commission, battered by conflict-of-interest allegations related to PSC staffers' ties to FPL employees, announced a two-month delay on its decision setting power rates for 4.5 million Florida customers. Under state law, FPL can boost rates in January even without a PSC decision. It would have to refund customers if the state later rejects the hike.

On Thursday, state Sen. Dan Gelber, D-Miami Beach, filed legislation that would give the state Cabinet a say in appointing commissioners and ban communication between state regulators and utilities.

"There needs to be adequate space between regulators and those they regulate," Gelber said recently. "They decide how much people pay and in hard times you want to make sure the decision-making is based on facts."

Corporate jet use emerged during FPL's bid for a $1.3-billion annual increase. During a second day of testimony Thursday, Commissioner Nathan Skop called for an independent financial audit into FPL's use of three corporate jets.

FPL has charged power customers $25 million from 2006 to 2008 to fly executives and company officials on business trips. Political figures have also flown on FPL jets, sometimes at company expense. Company executives also have access to the jets for personal and family use, although FPL officials say they reimburse for non-business flights.

Senior Assistant Attorney General Cecilia Bradley questioned a May 2006 flight that two employees and their wives took to Louisville around the time of the Kentucky Derby. They employees worked for an FPL affiliate and utility customers don't pay for those flights, FPL said.

In one case, an FPL official was questioned about flights to the Kentucky Derby and to Green Bay, Wis., in football season. Without providing details about the flights, he said the flights were for employees of FPL's alternative energy arm and customers don't pay for affiliates' flights. An FPL spokesman said the Green Bay trip was to the affiliate's nearby Point Beach nuclear plant and no one went to a football game.

Skop said the burden is on FPL to show that power customers aren't footing inappropriate airfare costs.

Skop suggested that an independent auditing firm – Deloitte&Touche, which does FPL's external audits – certify that FPL has proper protocols for billing airfare to guests. Another commissioner said that doesn't go far enough to satisfy questions about who flew and who paid.

"I still want information on flight logs," said Commissioner Nancy Argenziano, a former state senator.

FPL, the state's largest utility, says that even with the rate increase, a typical bill will decline from about $107 to $100 next year due to lower fuel costs. But fuel costs can change quickly and without the rate increase, the drop would be about $10 more.

If fuel prices don't decline, a homeowner would pay $12.40 more per month for the first 1,000 kilowatt hours of electricity.

On Thursday, FPL's chief financial officer, Armando Pimentel, said if rates aren't raised, the company might have a restricted ability to borrow money on Wall Street, which could lead to higher interest charges.

"Over the long term, if it's more costly for us to raise capital, customer bills will go up," he said.

But lawyers representing large electricity customers like hospitals and groceries, who are fighting the rate hike, noted FPL already has healthy profit margins that allowed it to withstand hurricanes and the 2008 financial crisis.

As testimony dragged on inside the PSC hearing room, statewide scrutiny is focused on the political drama surrounding the hearings.

Since the hearings on FPL's rate hike began in late August:

Two PSC employees stepped down and two others were put on administrative leave after they were accused of socializing with and having private phone conversations with FPL employees;

The commission banned instant messages on state-issued smart phones; and

State law enforcement began investigating the quasi-judicial PSC, amid allegations that commissioners and staffers had a cozy relationship with the utility they're supposed to regulate, FPL. Commissioner Katrina McMurrian is under fire for having a private dinner that included an FPL official, although she said she only exchanged "niceties" with him and her impartiality is not compromised.

Citing the newfound attention, PSC Chairman Matthew Carter said: "If you asked people a month ago, 'What's the PSC?' they would have said, 'I don't know, something at Dairy Queen or something.' "

Now, he added, "a whole lot of people are looking at what we're doing."

Josh Hafenbrack can be reached at jhafenbrack@sun-sentinel.com or 850-224-6214.




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