(November 2009)Regulators are in the unenviable position of determining an allowance for ROE that’s fair to consumers and investors in a volatile economy. The cases that stand out this year...
Bench Report: Top Ten Legal Decisions of 2010
2010 Law & Lawyers Report
of some 130 wind turbines, to be placed in Nantucket Sound, in federal waters about three miles off the coast of Massachusetts.
Seeking to challenge state permits for new 115-kV electric transmission lines that would connect the wind project to the grid, opponents argued that state agencies could—and in fact must—consider all environmental effects of the entire project.
But the court said no—that state regulators lacked jurisdiction to consider environmental impacts originating directly from turbines located in federal waters, as part of the permit process for transmission lines sited in state waters. (Alliance to Protect Nantucket Sound v. Energy Facilities Siting Bd., Mass. Sup. Jud. Ct. Nos. SJC-10596, SJC-10578, Aug. 31, 2010.)
5. $1 Billion Down the Drain
Florida PSC slashes FP&L rate request, as a busload of AARP members looks on.
“We’re going to call our meeting to order. Welcome to everyone. I see we have some guests also from AARP.”
With these words, then-Chairman Nancy Argenziano of the Florida Public Service Commission opened a special agenda hearing at 9:30 am on January 13, to announce the PSC’s decision to slash Florida Power & Light’s proposed $1.044 billion rate increase request down to $75.5 million, and to deny entirely a second, “pancaked” request that would have upped rates by another $247.4 million in 2011. The decision stunned FPL Group and led Moody’s to downgrade the company’s credit ratings.
“Our investors … have unfortunately seen what we believe is more than $1 billion in their FPL Group stock destroyed,” said FPL Group CEO Lew Hay. “This decision was about politics, not economics.”
As reported by the Associated Press, Florida Gov. Charlie Crist (R), seeking a boost in a tough fight for re-nomination, had replaced two incumbent commissioners with David Klement (in September 2009) and Ben A. “Steve” Stevens III (on Jan. 2, 2010)—who both helped forge the result slashing FPL’s rate request. Yet by early August, both Stevens and Klement themselves were replaced by Art Graham and Ronald A. Brisé, and Argenziano was to leave shortly thereafter.
In the decision proper, described in detail in a formal rate order released two months after the January hearing, the PSC trimmed a proposed 12.5 percent return on common equity to 10 percent. It disallowed more than $300 million due to an overstated depreciation reserve, and rejected FP&L’s proposed generation base-rate adjustment, explaining that new capital investments in generation plant shouldn’t be recovered through an automatic cost tracking clause, without regard to the reasonableness of construction costs or the status of company earnings.
FP&L announced on the day of the hearing that in light of a “deteriorating regulatory and business climate,” it would suspend activities immediately on projects representing about $10 billion in investment over the next five years. (Fla. P.S.C. Docket Nos. 080677-EI, 090130-EI, Order No. PSC-10-0153-FOF-EI, March 17, 2010 .)
At about the same time, Progress Energy Florida suffered much the same fate, as the PSC also turned back the company’s bid for a $500 million rate hike, allowing only a $13 million increase. (Fla.P.S.C. Docket Nos. 090079-EI et al., Order No.