Integrity Florida today released a new research report examining the Florida Public Service Commission (PSC) and many of the more controversial rate decisions the commission has made in recent years.
The report, titled Florida’s “Public Service” Commission? A Captured Regulatory Agency, builds on key findings by proposing a series of policy reform options that would greatly improve the PSC’s ability to serve the people of Florida.
“Investor-owned utilities regulated by the PSC have an extraordinary degree of influence on the Governor and the legislature and they have used that influence to pursue favorable decisions by the PSC, at the expense of the public,” said Ben Wilcox, Research Director for Integrity Florida. “This report shows that the Public Service Commission has been “captured” by the very industries it is supposed to regulate.”
The PSC has the dual responsibility of balancing the needs of monopoly utilities and their investors with the needs of consumers. The commission must set rates that are fair, just and reasonable for consumers, but utility investors must also be allowed to earn a reasonable return on their investment. When evaluating recent rate decisions researchers noticed some troubling trends.
“Many contested rate hike requests by utilities are resolved through settlements. However, utilities seem to be gaming the settlement process,” said Alan Stonecipher, Integrity Florida Research Associate. “The companies enter negotiations in rate cases much like a used car dealer who marks up the initial asking price knowing that they will eventually agree to a lower amount.”
“There also seems to be a pattern with the PSC, and other elected officials, allowing utilities to shift the costs of their most risky and speculative projects from shareholders to consumers,” said Brad Ashwell, Integrity Florida Research Associate.
The report makes several key findings:
- The Florida PSC meets the criteria for a “captured” regulatory agency.
- The PSC needs more independence from the Florida Legislature.
- Residential energy customers need more balanced prioritization.
- Utilities are gaming the settlement process.
- The PSC is allowing utilities to shift risk from shareholders to customers.
- The Office of the Public Counsel needs more independence, just as the PSC, and should likewise be insulated from political considerations.
In response to the report’s findings, Integrity Florida offers a list of policy options for lawmakers to consider:
- Return the Public Service Commission to an elected body or a mix of elected and appointed members.
- If all or part of the Commission is elected, consider prohibiting candidates for the commission from accepting campaign contributions from interests whose businesses are regulated by the PSC.
- Broaden membership on the Public Service Commission Nominating Counsel to include, at minimum, consumer groups.
- Require that the Office of Public Counsel must agree to any PSC settlements for cases in which it participates.
- If the commission is to remain an appointed body, require that it be nonpartisan by allowing no more than three of the commissioners to be a member of the same political party.
- Make residential and small business customers the focus of the Office of Public Counsel.
- Provide more funding for Office of Public Counsel.
- Explore making the Office of Public Counsel an independent entity like the Florida Commission on Ethics.
“The Public Service Commission and the Office of the Public Counsel need more independence from the Florida Legislature,” added Ben Wilcox. “The process for selection of PSC commissioners and the Office of the Public Counsel should be further insulated from politics and lobbying.”
Read the full report here.