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Progress challenges PSC audit

It says labor costs deemed excessive were related to posthurricane cleanups and in line with previous PSC decisions.

By LOUIS HAU
Published February 19, 2005

In its effort to charge customers extra to recoup the cost of last year's hurricanes, Progress Energy Florida on Friday disputed a recent audit by the Public Service Commission that accused the energy company of overstating those costs.

Progress regulatory services director Javier Portuondo said in an interview that his company's labor costs were legitimate and that the company was acting in accordance with previous PSC decisions in seeking reimbursement for excessive storm costs. Progress also made those arguments in a letter sent to the PSC in direct response to that agency's audit.

In the audit made public this week, the PSC's division of regulatory compliance and consumer assistance said the St. Petersburg utility had overstated its labor costs for hurricane work by $12.2-million. Those costs are among the $251.9-million in hurricane expenses that Progress has asked the PSC for permission to recover from customers via surcharges on their monthly bills.

Portuondo said that in 1994 the commission voted to allow Progress to earmark $6-million a year from customer rates for a reserve fund to cover extraordinary storm costs. At that time, he said, the PSC said the company could go back to its customer base for more money if the reserve fund proved to be insufficient.

"Fundamentally, by approving the $6-million, in essence they were acknowledging that they concurred with the costs we had outlined," Portuondo said. "They never explicitly approved every single type of cost, but implicitly they had to have gotten comfortable in order to approve the $6-million."

Portuondo expressed his concerns about the audit in a recent letter to the PSC auditing bureau. He said the company will provide more testimony by the end of the month.

The PSC audit also said the company had improperly paid $504,000 in overtime pay to employees who weren't eligible for such pay. Portuondo said the audit was referring to "extended pay" given to salaried employees which equaled their regular pay, not 150 percent of their pay, the usual definition of overtime.

Extended pay is common in the utility industry and compensates salaried employees "for their willingness to leave their families at a time of great personal stress to help others in the restoration," he said.

Portuondo added that Progress had previously been permitted by the PSC to charge extended pay against its storm reserve fund.

The PSC's audit also noted that Progress' September 2004 operating costs were 45 percent below budget at the height of its hurricane-restoration efforts, prompting it to express concerns that it might be a reflection of overstated storm costs.

Portuondo countered that many nonessential operations, such as electrical hookups for new subdivisions, were suspended as Progress line crews and out-of-state backup crews focused on emergency repairs.

"What they're losing sight of is that there is a significant amount of work that couldn't be performed during that time period that doesn't go away," he said. "That work will have to be addressed in subsequent periods and in excess of the budget of those months."

Louis Hau can be reached at 813 226-3404 or hau@sptimes.com

[Last modified February 19, 2005, 00:56:09]