Its final report to the PSC supports consumer advocates, who have labeled Tampa Electric's contract with its TECO Energy sibling a sweetheart deal.
By LOUIS HAU
Published August 27, 2004
The staff of the Florida Public Service Commission said Thursday that Tampa Electric Co. failed to take adequate steps to seek out the lowest-cost provider of coal-transport services.
The PSC staff's views were included in its final recommendation to the commission on the Tampa utility's coal-transport contract with TECO Transport, a fellow subsidiary of TECO Energy Inc.
The PSC is scheduled to vote on the nonbinding recommendation during a hearing Sept. 7.
Tampa Electric defends the transport contract, which it renewed for five years starting Jan. 1, as a good deal for ratepayers. The utility notes that the contract's terms were based on a cost benchmark previously approved by the PSC.
But consumer advocates, including the state Office of Public Counsel, have derided the pact as a sweetheart deal under which Tampa Electric pays its sibling excessive rates. Those rates are ultimately passed on to customers in their monthly bills.
In its 44-page recommendation, the PSC staff agreed with consumer advocates that Tampa Electric's bid specifications for the contract were stacked in favor of TECO Transport. As a result, the staff urged the commission to deem the specifications as insufficient for determining the market rate for coal transportation.
The staff also recommended that the commission throw out the benchmark, which the PSC formulated 16 years ago to impose a ceiling on the costs Tampa Electric could pass on to ratepayers for coal transport. From 1992 to 2000, the cost benchmark exceeded TECO Transport's charges by 25 to 52 percent, the staff noted.
The staff criticized Tampa Electric's practice of not trying to negotiate lower rates from bidders and for allowing TECO Transport to meet or beat any bid to win the contract, discouraging prospective bidders. In addition, the staff said, Tampa Electric did not adequately consider using lower-cost foreign coal sources or having coal shipped to its power plants via rail instead of barge.
The staff provided the commission with a choice of five recommendations to consider in determining whether Tampa Electric should be allowed to continue passing the transport costs on to its customers.
The staff's primary recommendation urged that the contract be amended to align its transport rates with those TECO Transport charges non-TECO companies. Three alternative recommendations urged the commission to make other changes to the contract that would result in annual savings for ratepayers of $13.8-million to $20.3-million. A fourth alternative deems the contract acceptable as it is.
Tampa Electric spokesman Ross Bannister said the company received the PSC staff's recommendations late Thursday afternoon and was still reviewing it. "We're going to see what this means for the company," he said.
Mike Twomey, a Tallahassee attorney representing a group of Tampa Electric customers in the case, said the recommendations were "a good start to bringing rates to a reasonable level."
Twomey, whose legal fees are being paid in part by a consumer group that solicits funds from other transport companies, pointed out that Tampa Electric charges the highest monthly rates of any Florida investor-owned utility. The company's coal-transport costs are one reason why, he said.
"The substance of what (the staff) said was entirely in opposition to what TECO was doing," Twomey said. "You can't read it any other way."
