The contract with a TECO subsidiary to deliver coal to power plants needs review, staffers say.
By LOUIS HAU
Published May 15, 2004
The array of opponents to Tampa Electric Co.'s contract with a subsidiary that brings coal to TECO energy plants is growing larger.
In addition to the range of consumer advocates and transport companies that have accused TECO of getting a sweetheart deal with a sister company and then making ratepayers pay for it, TECO must now contend with the skepticism of the Public Service Commission staff.
Earlier this week, the staff released its preliminary position on the controversial contract between TECO and TECO Transport, and that statement rejects key elements of the utility's defense that hiring a related company to ship coal to it power plants was good for TECO consumers.
The staff report said Tampa Electric's request for bids, which TECO Transport ultimately won, "contained restrictive terms and conditions which limited the number and type of bids" and that the utility "did not adequately evaluate" two bids it received from rail companies.
As a result, the PSC staff concluded that the terms of Tampa Electric's contract with TECO Transport for water-delivered coal "appear to overstate the market prices . . . for such services."
The staff also urged the PSC to evaluate Tampa Electric's request to pass those transport costs on to ratepayers "based upon the results of a fairly constructed and implemented competitive bid process."
The staff statement falls short of being a formal recommendation, which the staff won't formulate until after the PSC's hearing on the contract on May 27 and 28.
Tampa Electric collected bids last year on a new five-year contract to have coal delivered by water to some of its electricity plants. After reviewing the bids, the utility decided to award the contract to fellow TECO subsidiary TECO Transport, which has been providing coal-transport services to Tampa Electric for more than four decades.
Tampa Electric hailed the deal as good for ratepayers, saying it was concluded at better terms than its previous pact with TECO Transport.
The utility also said the bid process and a PSC-approved cost formula for calculating coal transport costs demonstrated that the contract's terms were competitive with prevailing market rates.
But in its statement, the PSC staff dismissed the 11-year-old cost formula as being "no longer relevant" and recommended that it should be eliminated.
Tampa Electric spokesman Ross Bannister said the PSC staff's observations didn't necessarily mean the company's contract with TECO Transport was flawed.
"The way we read it is that they want to better understand our proposal," he said. "We believe that our (bid) process was clearly prudent and appropriate and structured in a way that clearly stated what our needs are."
- Louis Hau can be reached at hau@sptimes.com or 813 226-3404.
