TALLAHASSEE – Rate hikes for about 123,000 customers of Florida City Gas will remain intact after the Florida Supreme Court on Thursday upheld the decision by state regulators.
In a 4-2 ruling, the court rejected a push by the Office of Public Counsel, a state agency advocating for consumers in utility rate cases, to overturn the decision of the Public Service Commission.
The crux of the decision dealt with how FCS calculated depreciation of its infrastructure and the related costs to maintain reliable service.
The PSC allowed the utility to use a reserve surplus amortization mechanism (RSAM) to account for changes in projected costs, including inflation. The rate request was filed in 2022, when inflation was hitting levels unseen in 40 years.
The majority of the court found regulators were correct to approve the utility’s use of RSAM in its rate request.
“The Commission was ultimately ‘persuaded by the testimony that the RSAM would allow FCG to manage its day-to-day fluctuations as well as take on the risk of both actual current as well as potential future increases in interest rates and inflation,’” Justice Renatha Francis wrote. “Accordingly, the Commission approved the RSAM, finding that it would provide customers with rate stability and certainty.”
READ MORE: Florida's NextEra moves to acquire Dominion Energy, merging two large East Coast utilities
Justices Jorge Labarga, John Couriel and Meredith Sasso joined the ruling.
But the Office of Public Counsel argued the use of the RSAM violated the PSC’s depreciation rule and could lead to customers being overcharged, with the surplus not being used to maintain reliable service.
In his dissent, Justice Carlos Muñiz largely agreed. In a footnote, he highlighted the PSC rejected its own staff recommendation, which noted the use of RSAM could lead to the money benefitting shareholders instead of customers.
“While I understand that the Commission is not compelled to accept the analysis and recommendations of its professional staff, it is nevertheless concerning—and perhaps telling—that the Commission chose to entirely ignore its own staff’s logical and intuitive analysis and recommendation that ‘the proposed RSAM contradicts well-established Commission practice and ratemaking principles, could potentially result in double recovery by the Company from its customers in the future, and could allow a depreciation surplus paid by customers to be transferred unfairly to shareholders,’” Muñiz wrote.
Justice Jamie Grosshans joined in the dissent.
FCG serves customers in Brevard, Indian River, St. Lucie, Martin, Hendry, Palm Beach, Broward and Miami-Dade counties.
In 2023, NextEra, the parent company of Florida Power & Light, sold FCG to Delaware-based Chesapeake Utilities. But in a footnote Francis’ ruling incorrectly stated FCG was a subsidiary of FPL.
FCG’s rate request was for four years. In February, the company filed another rate increase request of $35 million with the PSC, citing increased operations and maintenance costs, along with the “impact of inflation on labor and materials.”
