As Florida's Public Service Commission considers matters affecting your monthly utility bills, politicians, lobbyists and consumers try to pull decisions their way.
By LOUIS HAU
Published December 8, 2003
[Times photo illustration: Jamie Francis]
Pop quiz: Name the five members of the Public Service Commission.
It's a safe bet that few Floridians can. Yet the PSC and its staff of more than 300 regulate rates for most of the state's electricity, gas and wired phones as well as some of its water and sewer service.
In other words, nobody in government has more of a direct say over the size of your monthly utility bills.
The state laws that govern the PSC assign it the trickiest of balancing acts: It's supposed to protect the interests of consumers while allowing utility companies a fair return on their investments.
Questions have been raised over the years about the PSC's effectiveness, particularly its vigilance in protecting consumers. This week, the commission will face what may be its toughest test ever, a decision that will determine the home phone rates of nearly every Floridian.
Two years ago, Gov. Jeb Bush vetoed legislation crafted by the big local phone companies that would give them hefty increases in basic phone rates with the expectation of compensating cuts in rates for instate long-distance calls. This year, Bush signed the bill after tinkering that gave the PSC authority to review the rate applications from Verizon, Sprint and BellSouth.
In other words, the politicians passed the hot potato to the PSC.
Hearings are scheduled for Wednesday, Thursday and Friday in Tallahassee, leading to a vote. But the process could be short-circuited if the commission decides Wednesday to approve a request by Attorney General Charlie Crist to throw out the applications.
If the PSC accepts the rate hikes, which range as high as 90 percent over two years, there's sure to be outrage among many phone customers, consumer activists and advocacy groups such as AARP. If it rejects the hikes, phone companies and key legislators may accuse the panel of ignoring the mandate of a state law that they say will increase competition in local phone service and reduce long-distance rates.
The uproar over phone rates underscores that the PSC is no academic think tank, pondering utility rates in a vacuum. It's constantly buffeted by public opinion, and by the politically connected, deep-pocketed utilities it regulates.
Those pockets are deep: State campaign records show utilities contributed millions of dollars to the state's political parties and elected officials in recent years.
Companies also spend heavily on lobbyists to press their case with legislators and PSC staff and to hob-nob with commissioners at regulatory conferences and industry meetings. It's hardly a surprise, critics say, that many former PSC commissioners, staff and utility-friendly legislators ultimately end up working for utilities.
PSC chairman Lila Jaber rejects criticism that the commission doesn't do enough to protect consumers, pointing to cases that the commission initiated against Progress Energy Florida of St. Petersburg and Florida Power & Light Co. that led to sharp declines in customer rates.
"I think this commission has shown we're willing to do our homework, ask tough questions, and I think customers benefit from that," she says.
Attorney General Crist, who has criticized utility excesses in his current office and when he was a state senator from St. Petersburg, said he is "generally pleased" with the commission's performance but remains "ever vigilant" to ensure that consumer interests receive a fair hearing.
Other observers aren't as kind. State Sen. Mike Fasano, R-New Port Richey, said the PSC has done only a fair job of protecting consumers.
"I would love to see Public Service Commissioners speak out more, challenge those utility companies," he says. "They really have a tremendous responsibility and could be a voice of the consumer and a voice of fairness. And I haven't seen that yet."
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The Legislature created the Florida Railroad Commission in 1887 to regulate railroad passenger and freight rates and operations. Lawmakers abolished that commission in 1891, only to revive it in 1897.
It became the Public Service Commission in 1965. Today, it has authority over investor-owned electricity, gas and local phone utilities and, to a lesser extent, municipally owned electric and gas companies and rural electric cooperatives.
For many years, the PSC was made up of three commissioners elected statewide. That changed in June 1978 when Gov. Reubin Askew signed into law narrowly approved legislation that turned the PSC into a five-member appointed commission. The rationale was that appointed commissioners would be better qualified for their posts and better shielded from utility influence because they would no longer have to raise money for statewide election campaigns.
The change was backed by some consumer-minded voices, including the editorial board of the St. Petersburg Times. But losing the opportunity to elect PSC commissioners was deeply unpopular with Florida voters. Less than five months after the legislation became law, Floridians rejected by nearly a 2-1 margin a ballot question that would have locked in the change as a constitutional amendment.
An appointed PSC was strongly supported by the state's utilities, who were concerned about the populist, proconsumer stance of then-PSC chairwoman and future U.S. Sen. Paula Hawkins.
Hyatt Brown, who was House speaker-designate at the time, got the votes he needed for the bill by threatening to kill a tax-break package sought by Panhandle legislators. Brown now sits on the boards of directors of BellSouth and FPL Group, the parent of Florida Power & Light Co.
Today, the Florida commission remains appointed, as are most state utility commissions nationwide. But that hasn't stopped efforts by utilities to ingratiate themselves with commissioners.
In June 2002, it was the Florida PSC commissioners' turn to host their counterparts at the annual meeting of the Southeastern Association of Regulatory Utility Commissioners. Progress and Florida Power & Light pitched in $3,000 and $3,800 respectively to co-sponsor a luncheon at the Miami gathering.
The Florida Telecommunications Industry Association collected contributions from phone companies and electric utilities, including Progress, Verizon, BellSouth and Sprint, to hold a golf tournament during the conference.
State auditor general William Monroe has begun a preliminary investigation of the Miami conference for potential improprieties at the request of state Sen. Nancy Argenziano, R-Crystal River.
It wasn't the first such incident for the PSC. In 1991, a lobbyist for United Telephone Co. of Florida admitted he bought lift tickets at a Utah resort for two Florida commissioners during a telecommunications conference. In 1993, PSC commissioner Michael Wilson resigned to take an executive post with FPL. (Wilson is currently FPL's vice president of governmental affairs in Washington.) Later that year, commissioner Tom Beard decided not to seek reappointment after it was revealed that he had dated two employees of BellSouth.
Critics say close links between regulators and regulated companies have led the PSC to tilt toward utilities.
One example cited by critics: the PSC's deliberations last month on the deal Progress Energy Florida has with another subsidiary of Progress Energy Inc. to transport coal by barge to its power plants. The PSC staff determined that a commission-approved cost formula that Progress uses allows the subsidiary to charge above-market prices and reap excessive profits at the expense of ratepayers.
Nonetheless, the PSC staff worked out a deal with Progress that would have allowed the company to continue using the same cost formula through 2004 before putting the contract out to competitive bidding. The commission rejected the proposal, but still voted 4-1 to allow Progress to pass on to its customers the supposedly excessive costs from last year and this year.
"They said (the profit margin) was unreasonably excessive and operated to the detriment of ratepayers," says Tallahassee lawyer Mike Twomey of Florida Utility Watch. "How much clearer do you have to be?"
That vote was a mere blip compared with the uproar that erupted earlier this year over Progress' rate refund dispute with the Office of Public Counsel. Former PSC chairwoman Julia Johnson, now a consultant for Progress and other utilities, passed on briefing materials about the dispute to aides for commissioners Charles Davidson and Rudy Bradley.
PSC rules don't prohibit such behind-the-scenes contacts with the commission's staff, only with the commissioners. Davidson and Bradley said their aides did not pass on the materials to them.
But the rate dispute took another unusual turn. In a draft recommendation, the PSC staff advised the commission to side with the public counsel's office and order a bigger refund than Progress Energy proposed. But Davidson and Bradley asked the staff to water down the recommendation, resulting in an unusual staff memo that recommended no specific course of action.
The commission ultimately voted 5-0 against Progress. Consumer advocates partly credited the intervention of Attorney General Crist, who came out in support of the bigger rate cut.
Critics also say the commission has a decidedly mixed record in keeping electric rates low. The PSC can initiate reviews of a company's earnings and determine whether customer rates need to be adjusted. Two of the commission's most recent initiatives have been rate cases against Florida Power & Light and Progress, which led to steep cuts last year in customer bills.
But those actions were largely the result of settlements reached by hard-nosed public counsel Jack Shreve, who retired in June after 25 years in office.
"When costs go up, companies come in quickly" to ask for rate increases, says Roger Howe, who retired as a deputy public counsel in May. "But there seems to be an inherent bureaucratic lag in addressing whether rates should be reduced."
Shreve said he gives the current commission a "thumbs up," but acknowledges having had run-ins with commissioners and PSC staff in the past.
"We've had some fights where we felt we needed to put their feet to the fire," Shreve says.
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Utilities boast a formidable army of well-connected lobbyists to argue their case in Tallahassee.
Among the ranks of utility lobbyists are 11 former state legislators, including three former speakers of the House (John Thrasher, Ralph H. Haben Jr. and James Harold Thompson); two former chairmen of the state Republican party (Al Cardenas and Van Poole); three who served as chiefs of staff for governors (Brian Ballard, Mac Stipanovich and Jim Krog); a former secretary of state (Jim Smith); and Sen. Bob Graham's son-in-law (Mark Logan).
TECO Energy, parent company of Tampa Electric, and its affiliates employ more than 25 lobbyists, including Thrasher, former state legislator and PSC commissioner Frank Messersmith and Courtney Bense, the daughter of incoming house speaker Allan Bense, R-Panama City. Thrasher and Courtney Bense also lobby for Florida Water Services Corp.; Bense also lobbies for Verizon.
"You have a lot of special interests weighing in there," Argenziano says. "Public service commissioners need to be more isolated from that pressure."
Terry Deason, who has been a commissioner since 1991, downplayed the impact of all the politically connected lobbying.
"The only pressure I've ever felt as a commissioner is to do a good job, to be fair to all and to do my homework," he says. "I have felt no pressure through the political process of reappointment because I felt that the best way to get reappointed is to base it on the record of the commission, and that's based on doing a good job."
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Whatever the impact of campaign funds and industry lobbying, Twomey, the consumer advocate, says PSC commissioners are not accountable to voters, and the politicians who appoint them can't be pinned down either.
The governor appoints commissioners but has to choose from a list of at least three candidates presented by a nine-member nominating committee controlled by the Legislature.
Twomey, a former PSC staff attorney, argues that the nominating council should be abolished, allowing the governor the freedom to appoint whomever he wants.
Otherwise, he says, "The governor can say with some plausibility, "I'm not responsible for this. I picked somebody I had to.' "
Twomey also argues that once their initial term is up, commissioners should face retention elections, as do state appeals court and Supreme Court judges.
"They would have reacted more rapidly during the years when there were lots of poor quality service complaints for phone companies and excessive earnings for electric companies if they were more politically accountable," he says.
The departure of public counsel Shreve worries consumer advocates who fear it might change the balance of power between utility and consumer forces. Thanks to politically popular rate-reduction settlements that Shreve was able to extract from utilities, he gained enough stature over the years to make his annual reappointment by a legislative committee virtually routine.
Newly appointed public counsel Harold McLean vows to continue Shreve's tough advocacy for consumers, but the uncertainty of an annual appointment may loom larger for him as a newcomer.
For their part, utility executives say they don't view the PSC as a pliable body. Richard Lehfeldt, TECO's senior vice president of external affairs, described the commission as stubbornly independent. He noted that the commission recently decided to hold separate deliberations next year on Tampa Electric's controversial coal-transport contract with TECO Transport, despite the company's efforts to keep it part of the PSC's annual fuel-cost adjustment hearings in November.
"We basically tried to move heaven and Earth with our persuasive skills, and we failed," Lehfeldt says.
More skeptical observers think the PSC needs to demonstrate more independence.
"You have to have individuals who do their homework, who listen, who I hope have a little sympathetic heart for the consumer," Fasano says. "Because they're the ones who always seem like they're getting ripped off."
- Times staff writer Lucy Morgan and Times researchers Cathy Wos and Mary Mellstrom contributed to this report. Louis Hau can be reached at hau@sptimes.com or 813 226-3404
Utility campaign spending
Here is a sampling of utility company campaign contributions to state candidates and parties, 1996 through September.
- Progress Energy Florida Inc. (formerly Florida Power Corp.): $1,820,409 (including $520,084 to Republican Party; $189,504 to Democratic Party)
- Tampa Electric Co. and parent TECO Energy Inc.: $1,954,964 (including $938,166 to Republican Party; $553,000 to Democratic Party)
- Florida Power & Light Co.: $1,961,340 (including $628,551 to Republican Party; $399,380 to Democratic Party)
- Gulf Power Co. and parent Southern Co.: $10,026 (no party breakdown)
- Verizon Communications Inc. (formerly GTE in Florida): $1,261,453 (including $681,197 to Republican Party; $170,938 to Democratic Party)
- BellSouth Corp.: $3,406,910 (including $957,414 to Republican Party; $406,842 to Democratic Party)
- Sprint Corp.: $1,670,061 (including $758,583 to Republican Party; $402,963 to Democratic Party)
- Florida Water Services Corp.: $150,871 (including $77,325 to Republican Party; $10,500 to Democratic Party)
Source: Florida Department of State, Division of Elections
PSC members
Chairman Lila Jaber
Age: 37
Term ends: January 2005
Previous experience: PSC staff attorney, aide to commissioner Julia Johnson.
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Braulio Baez
Age: 39
Term ends: January 2006 (becomes chairman in January)
Previous experience: lawyer with Miami law firm Leibowitz & Associates, represented municipal and county governments in telecom, cable franchising and other regulatory matters; aide to former PSC commissioner Joe Garcia.
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Rudy Bradley
Age: 57
Term ends: January 2006
Previous experience: director of alternative education for Florida Department of Education; state House representative from St. Petersburg, vice chairman of House telecommunications and utilities committee, and chairman of utilities deregulation committee.
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Charles Davidson
Age: 40
Term ends: January 2007
Previous experience: staff director of information-technology committee, Florida House of Representatives; executive director of Gov. Bush's information technology task force; and antitrust lawyer with New York law firm Baker & McKenzie.
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Terry Deason
Age: 49
Term ends: January 2007
Previous experience: chief regulatory analyst, Office of Public Counsel; aide to former PSC commissioner Gerald Gunter.
