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Gulf Power's plan to increase fixed charge on bills draws objections

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Gulf Power's plan to increase fixed charge on bills draws objections

Ahead of public hearings on Gulf Power Co.'s $107 million rate increase request, some critics are describing the utility's plan to more than double the fixed portion of residents' charges on bills as likely to hinder energy efficiency and harm low-income customers.

Customers of Southern Co.'s Florida subsidiary will have the opportunity to weigh in on the rate increase request at two public hearings scheduled for Jan. 26 in Pensacola, Fla., and Jan. 27 in Panama City, Fla. Gulf Power in Oct. 2016 asked the Florida Public Service Commission for approval to increase retail rates by $106.8 million, with an 11% return on equity. The utility's current ROE midpoint is 10.25%, within a range of 9.25% to 11.25%.

The Southern Alliance for Clean Energy, an intervenor in Gulf Power's rate case and a frequent critic of Florida's investor-owned utilities, called on members of the public Jan. 21 to attend the public hearings and emphasized the component of the rate case that would significantly increase the fixed-cost portion of a residential customer's monthly bill.

Gulf Power proposed a base charge for residential customers of $1.58 per day and an energy charge of 3.3 cents/kWh, compared to current residential pricing of a 62 cent per day base charge and an energy charge of 4.6 cents/kWh. In a 30-day month, that works out to base charges of approximately $47 per month for residential customers, compared to about $19 currently.

In testimony, Gulf Power Regulatory and Pricing Manager Robert McGee described the new rate structure as an attempt to address an existing weakness where the utility does not recover enough from "cost-causers," with some residential customers paying less than the costs to serve them and other customers paying more, an inequity he estimated at $20 million annually. The rate structure Gulf Power proposes would better address the recovery of demand-related costs from customers, according to McGee, and remedies the current situation where too much of a customer's demand-related costs are recovered through the energy charge. As examples, McGee described occupants of inefficient or otherwise poorly-insulated homes pay more than they should in demand-related costs, while certain condo owners, small vacation home owners or those owning private, residential metered boat docks pay less than they should.

Gulf Power's proposal also includes an assistance program for low-income customers with a credit of approximately $21 per month. To qualify, customers must participate in the Supplemental Nutritional Assistance Program.

Testifying on behalf of the Southern Alliance for Clean Energy and the League of Women Voters, Karl Rábago, executive director of the Pace Energy and Climate Center at the Elizabeth Haub School of Law in New York, described Gulf Power's proposal as "deeply flawed, wholly unsubstantiated, and inadequate justification for its request to increase fixed customer charges for residential rate classes." Increasing fixed charges would have a particularly adverse impact on low-income customers, energy efficiency, conservation and renewable energy, he added. A volumetric charge, according to Rábago, "can fully recover those sunk fixed costs, preserve cost-causation features, and send more rational price signals to residential customers." On its website, the Southern Alliance for Clean Energy said Gulf Power's proposed higher fixed charge would "severely limit" the options for customers to cut energy use and save money on bills.

Gulf Power's rate case hearings before the Florida PSC are scheduled for March 20 to March 24. The utility has asked for a decision on the request in time for new rates to take effect in July. (Florida PSC docket 160186-EI)