Tampa Electric outlines plans for base rate hikes

February 1, 2021

Jim Turner

TALLAHASSEE --- Tampa Electric Co. will ask state regulators to approve base rate increases, with an initial installment of $280 million to $295 million in 2022 as part of a multi-year effort to build a “smarter” power grid that provides reliable energy.

In a filing Monday, the utility, which serves almost 800,000 customers in West Central Florida, said a formal application to the Florida Public Service Commission will be made this spring for rate changes that would start taking effect in January 2022.

“The general base rate relief to be addressed in the company's upcoming petition will be critically important to enable Tampa Electric to maintain its financial integrity while continuing to provide safe, reliable, responsible and efficient electric service and to meet our customers' expectations,” Tampa Electric President Nancy Tower wrote in a letter to commission Chairman Gary Clark.

Tampa Electric residential customers who use 1,000 kilowatt hours of electricity a month --- a common industry benchmark --- currently pay $105.25. The monthly cost went up $7.56 in January for such customers because of higher costs of natural gas for power plants, an expense on top of base rates that varies from year to year.

The company Monday did not detail how customer bills would be projected to change next year if the rate increases are approved.

The proposed $280 million to $295 million rate increase in 2022 would be followed by increases of $100 million in 2023 and $30 million in 2024. 

The additional money in 2022 would help pay for a “modernization” project at the utility’s Big Bend Power Station in Hillsborough County, advanced metering infrastructure and expansion of solar power.

The 2023 increase would help pay for solar projects and the Big Bend project, while the 2024 increases would go for solar projects, according to the utility. The filing said base rate increases would be partially offset by savings in power-plant fuel costs.

In the letter, Tower said the company’s solar units produce enough electricity to power more than 100,000 homes, businesses and schools, and the plan is to build an additional 600 megawatts of solar capacity through 11 projects.

“When we complete these additional solar projects, nearly 14 percent of our energy will be from solar,” Tower wrote. “This cost-effective long term energy solution will be enough to power more than 200,000 homes, and will promote price stability for customers, increase our fuel diversity and reduce carbon emissions.”

Tower listed 10 major factors driving the proposed base-rate increases, topped by current revenue growth not being able to keep up with the costs of projects like the Big Bend modernization, smart grid infrastructure and the new solar plants. 

Other factors include investments in information technology to improve customer service and increase cyber-security, the addition of about 40 miles of overhead transmission lines and 890 miles of underground distribution lines since 2013, and the need to provide an “appropriate” return to investors. 

The letter said the company will seek approval for a 10.75 percent return on equity --- a common measure of profitability --- though the return would be able to fluctuate within a range above and below that amount..

“An appropriate return on common equity is essential for a regulated utility to attract capital necessary to make long-term investments, maintain and improve the company’s quality of service, and lower costs for customers over time,” Tower states. “Tampa Electric currently projects that its earned ROE in 2022 without rate relief will be below five percent.”

Tampa Electric is operating under a base-rate agreement reached in 2017 that ends Dec. 31.

Base-rate cases are among the most closely watched issues at the Public Service Commission, as they involve large amounts of money and extensive financial and technical details.

Last month, Florida Power & Light took a similar step in seeking approval of a four-year rate plan that would increase the amount of money customers pay and finish a merger with Gulf Power.

FPL is asking for a $1.1 billion increase in base-rate revenues in 2022 and a $615 million increase in 2023. The proposal also calls for a $140 million increase in 2024 and a $140 million increase in 2025 to pay for solar-energy projects.

Both companies’ filings will lead to months of analysis and hearings that will include representatives of consumers.