Public Service Commission filing delays franchise negotiations and increases costs to city taxpayers and LCEC members

(March 2016) — The City of Cape Coral this month advised LCEC of its intent to file a request with the Florida Public Service Commission (PSC) challenging LCEC’s electric rate structure. Unfortunately, the legal theories to be discussed with the PSC relate directly to franchise agreement terms provided by the City to LCEC on March 9, meaning that no substantive negotiation can take place until the PSC rules.

After waiting nearly a year for a franchise proposal from the City, LCEC had hoped to begin good-faith negotiations immediately. However, it would be a waste of both taxpayer and LCEC member resources to negotiate terms that are part of a legal challenge before the FPSC. It will mean a costly delay in working out a resolution in the best interests of their constituents.

Electric cooperative rate structures are reviewed by the PSC to ensure they are non-discriminatory. The PSC has reviewed and approved LCEC electric rates – now among the lowest in Florida – many times over the years. LCEC recently reduced rates for the fourth time in two years, reporting rate changes to the PSC each time.

Utilities conduct cost-of-service studies to establish pricing that is equitable and to ensure that one customer class does not subsidize another. The studies establish customer pricing that is at levels appropriate to serve residential, commercial, and industrial customers. LCEC performs and submits all documentation required by the PSC.

The City’s legal consultant is recommending a PSC filing based, in part, on the belief that costs and pricing should change within rate classes based on population density across geographic regions. In other words, rates should change based on geography, and customers in some areas should pay more than customers in other areas. The cost and effort to conduct additional research by geography would be extensive and would serve no purpose with respect to electric rates.

Interestingly, while arguing this geographic-based rate theory, the City maintains a traditional rate structure for its water utility that is not based on population density. Some areas of Cape Coral are more dense than others, but all City water customers pay the same rate.

“We are disappointed that efforts and resources continue to be aimed at litigious activities rather than focusing on the negotiation of a new franchise agreement,” said CEO Dennie Hamilton. “We stand ready to work together with City leaders to negotiate an agreement that is in the best interests of our members in the City, and we hope such negotiation can begin soon.”

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  1. Pingback: New franchise agreement discussions to begin - LCEC Cape Coral Franchise Agreement Resource Center

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