Gulf Power Seeks Rate Increase

By: Jim Saunders, The News Service of Florida
By: Jim Saunders, The News Service of Florida

THE CAPITAL, TALLAHASSEE, May 27, 2011 -

Gulf Power Co. this summer plans to ask for a $95 million increase in base rates, arguing that the cost of supplying electricity to the Panhandle has jumped during the past decade.

The Pensacola-based utility filed a document this month with the state Public Service Commission that outlines the proposal.

If granted, the proposal would translate to a 21.5 percent increase over Gulf’s 2010 base-rate revenues of $442 million --- though it is too early to know how such a hike would affect individual customers’ bills.

Company spokeswoman Sandy Sims said Gulf has not sought base-rate change in 10 years. She said the company has “pushed off and pushed off as long as we can” any increases, but it needs higher rates to help protect quality of service.

“We wouldn’t be asking for it at this point if it wasn’t necessary,’’ Sims said Thursday.

Gulf likely will file a detailed proposal with the Public Service Commission in July, starting a months-long review process and hearings. Sims said the company hopes new rates will take effect in April 2012, though it also wants a so-called “interim” rate increase later this year that would involve a smaller amount.

State Public Counsel J.R. Kelly, whose office represents consumers in utility cases, said it is premature to know whether Gulf can justify the $95 million increase. But he said his office will closely examine the proposal.

“We will have our experts lined up and ready to contest, I’m sure, many of their issues,’’ Kelly said.

Gulf likely will be the first of three electric utilities that will take base-rate cases to the Public Service Commission during the next year. Florida Power & Light and Progress Energy Florida are operating under rate plans that end Dec. 31, 2012, and Kelly said he expects them to file new proposals late this year or in early 2012.

Base rates pay for many of the day-to-day operations of utilities. But they don’t include costs for such things as power-plant fuel and certain types of environmental upgrades.

Gulf and the other utilities go before the Public Service Commission each year to get approval for passing along those costs to customers. The costs fluctuate, which can lead to customers facing higher bills if, for example, the cost of coal or natural gas increases.

With about 428,000 customers, Gulf is the dominant utility in the Panhandle. Rates are set differently for residences and businesses, and it is unclear how any increases would be spread among Gulf’s customers.

The document that outlines the proposed increase was filed with the Public Service Commission on May 9. In the document, Gulf said it has faced increased infrastructure costs during the past decade, such as the cost of adding 1,000 miles of new power lines.

“Gulf has avoided a base-rate proceeding for as long as possible,’’ said the document, signed by company President and CEO Mark Crosswhite. “An increase in base-rate revenues is now necessary to maintain a reliable electric system and to preserve our financial integrity, which is in the long-term best interest of our customers.’’

Gulf received new revenues during the past decade because of growth in Northwest Florida, but Sims said such growth only partially offsets the higher costs.

Kelly took issue with the idea that Gulf should receive approval because it hasn’t filed a base-rate case in so long. He pointed to factors such as customer growth and improved technology, which can reduce expenses.

“That, in and of itself, is never a valid argument,’’ he said.


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