Not content with exposing Florida to financial catastrophe by taking on responsibility for insuring coastal properties, Florida Governor Charlie Crist (R) continues his assault on his state's fiscal health, this time by imposing nonsensical populist measures on utilities. As Seeking Alpha's Roger Conrad observes:
Florida Governor Charlie Crist is running for US Senate in 2010--and darned if he’s going to let power utilities’ need for capital during a recession stand in his way.On Thursday, Crist effectively fired two long-standing members of the Sunshine State’s Public Service Commission, replacing them with wholly inexperienced former editorial page editor David Klement and Benjamin Stevens, the chief financial officer for the Pensacola Sheriffs’ Office.
It doesn’t take PhD in political science to get the message here: Florida utility regulators will, in Crist’s words, “put consumers first”--i.e., reject the pending rate hike requests from FPL Group (NYSE: FPL) for $1.3 billion and Progress Energy (NYSE: PGN) for $500 million or else.
Crist’s move will almost certainly make rate cases more contentious in Florida, and by extension make it more difficult for companies to recover regulated utility investment.
Ultimately, Florida consumers will suffer most if Crist’s moves really signal a shift to so-called pro-consumer regulation in what’s historically been a model state for utility/regulator relations. Long-term planning for power needs will become problematic, and utilities will pull back capital spending rather than see their balance sheets weakened.
What is surprising is that this upheaval isn’t taking place in an historically contentious state like Missouri or New York. Rather, this is happening in Florida, heretofore a state with very constructive utility/regulator relations.
Crist's moves are indeed galling in light of Florida's past history of relatively sound governance at the state level. Now the state's residents will need to worry about blackouts -- in addition to the state being able to shoulder insurance payments -- the next time a large storm hits. (Thanks to Margaret Griffis for the Seeking Alpha link.)