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FPL’s Bogus $1.25 Billion Rate Increase: Ex-PSC Commissioner Nathan Skop Tells All

| January 10, 2011

florida power and light

Wired for complaints. (© Burnt Umber)

Former Florida Public Service Commissioner Nathan Skop has argued that the utility regulation panel’s decision to deny most of a record $1.25 billion rate increase for Florida Power & Light cost him his job, but he told the News Service of Florida that history has shown it was the right thing to do. Most electricity customers in Flagler County get their power from FPL.

Freed from constraints on speaking about cases he ruled on as a member of the commission, Skop said in a wide-ranging exit interview that FPL’s claims that denying the rate increase would harm the company financially haven’t come to fruition.

“Although the decision in the FPL rate case was widely criticized…the commission, including three honorable commissioners – Commissioners Benjamin Stevens, David Klement and Nancy Argenziano – made the right decision, as evidenced by the fact that the lights are still on,” Skop said, also including himself in the PSC honor list. “FPL was a strong company before the rate case was decided and FPL continues to be a financially healthy company after the rate case was decided.”

FPL declined to respond to Skop’s comments Thursday afternoon.

Skop pointed to the fact that a large portion of the rate increase – $900 million, he said – was denied in the PSC’s professional staff recommendation on the FPL request (Docket No. 080677-EI). He also pointed to a recent deal reached by FPL, the state’s largest power company (with 4.5 million customers), and several consumer advocates to freeze base electric rates for the company for two years as evidence the PSC’s original decision was valid.

The PSC “unanimously voted for the deal FPL struck with consumer advocates four months ago,” Business Week reported last month. “It was stalled by a dispute between the utility and Commissioner Nathan Skop over Skop’s objectivity. Base rates can be changed through 2012 only if the company’s profit rate falls below 9 percent or tops 11 percent. The commission set that profitability range for the company earlier this year when it approved only $75.5 million of a $1.25 billion base rate increase sought by FPL.”

“The settlement affirms the commission’s decision in all material aspects,” Skop said. “It’s readily apparent that the commission made the right decision, irrespective of the criticism.”

However, criticism from lawmakers after the decision has been widely been seen as leading to Klement, Stevens, Argenziano and Skop all being kicked off the PSC. Skop and Argenziano sought to return for new terms, but weren’t granted interviews.

Skop said the case clearly became politicized – on all sides. Gov. Charlie Crist implied he likely would not re-appoint two commissioners unless they voted against the rate increases. And a global credit rating agency, New York-based Fitch Ratings, put FPL on a watch list for a downgrade after the PSC rejected a rate increase for Progress Energy Florida.

But Skop denied politics played a role in his vote on the increase.

“It was never political from my perspective,” he said. “The role of the commission is not to be pro-utility or pro-consumer. It’s to decide the cases on the merits, based on the record evidence, in a fair and impartial manner. I couldn’t care what was going on downtown (in Tallahassee). Didn’t bother me.”

Skop’s outspokenness about FPL, which appeared to increase after he was denied a second four-year term on the PSC, resulted in a legal fight in which the company asked a court to bar him from ruling on its cases because he was biased against it.

Skop noted that with him now off the PSC, the average length of service of the five sitting commissioners is less than year, with only one, Commissioner Lisa Edgar, having been there longer than that.

“One of the problems currently facing the commission since four commissioners were effectively purged…is that there is a demonstrated lack of experience and institutional knowledge on the bench at this time,” he said, though he quickly added “that’s nothing against…the current commissioners.”

Skop said new Commissioners Eduardo Balbis and Ronald Brisé had impressed him in their short tenures on the PSC, and he hoped his replacement, Commissioner Julie Brown, would be diligent too.

Skop added that he had nothing against FPL – or any of the other regulated utilities in Florida, for that matter – despite the legal wrangling and pointed criticisms late in his term.

“I believe in passive regulation,” he said. “I don’t believe you should beat up on the utilities. But I also believe that the utilities have an obligation to prove their case on the merits and if they prove their case on the merits, I’ve always given what they deserved. And when they come in and tried to pull the wool over my eyes, I’ve taken them to the woodshed.

“I make no apologies for doing my job,” Skop continued. “That’s what…the commission is for. They have a regulated monopoly and they enjoy the benefits of that monopoly and as a result, subject themselves to regulatory oversight of the commission.”

As for the lesson people take away from his tumultuous tenure on the PSC, Skop said he hoped it would be that the commission deserved more independence from lawmakers.

“The issue with the commission is that while we’re an arm of the Legislature, or as the Florida Supreme Court says ‘a creature of the Legislature,’…they may not like the decisions we make as they hear from their constituents, they need to give us the discretion to make decisions independently from the political process,” he said. “That’s the expertise of the commission and of the commissioners.”

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