BRADENTON, Fla. Florida may join 11 other states that allow investor-owned power utilities to issue tax-exempt bonds by securitizing a dedicated portion of their customers bills to finance obligations and improvements, in this case to provide storm recovery financing.
House and Senate bills on the proposal will be considered during the 60-day session of the Florida Legislature, which began on Tuesday.
HB 303 would provide the Florida Public Service Commission, which regulates utilities, a method to use in considering storm-cost recovery, according to an analysis of the bill sponsored by Rep. Holly Benson, R-Pensacola, who is a bond lawyer.
The bill would allow an electric utility to petition the PSC for a financing order to issue bonds and use the proceeds to recover the cost of restoring electric service following storm damage sustained in 2004, including replenishment of storm reserves and costs incurred beyond the reserve fund balance, the analysis says.
Revenues received pursuant to these bonds, and the transactions related to these bonds are exempt from state and local taxes, the analysis says.
Four investor-owned utilities regulated by the PSC reported spending $1.5 billion repairing transmission and distribution facilities as a result of Hurricanes Charley, Frances, Jeanne, and Ivan last year.
HB 303 does not request money from the state nor does it create public debt, attorney Susan Clark told the House Utilities and Telecommunications Committee in January, state records show.
The bill benefits customers because it lessens the rate impact by spreading it out over a number of years and it secures funds for future storm restoration, said Clark, an attorney with Radey Thomas Yon & Clark PA in Tallahassee.
Clark is also a registered lobbyist for Florida Power & Light Co., Gulf Power Co., Progress Energy Inc., and Tampa Electric Co. the four utilities urging the Legislature to pass HB 303. Clark could not be reached for comment.
According to legislative documents, FPL spent $890 million on repairs after the storms and had $354 million in reserves for storm repairs. Gulf Power had $124 million in repairs and a $28 million reserve. Progress Energy had $366 million in damages and $47 million in reserves. Tampa Electric had $72 million in damages and $44 million in reserves.
The total estimated shortfall in emergency reserves is $977 million.
Our thinking is that we would issue bonds that would be sufficient to cover not only the cost of the hurricanes from last year, but also to issue bonds to quickly replenish the storm reserves for the year going forward, said FPL spokesman Bill Swank.
Under the proposed securitization program, Swank said the bonds could have maturities between two and 15 years. They would not be exempt from federal taxes, he added.
However, the bonds would be exempt from state taxes and Swank said high credit ratings would be expected due to the securitization aspect; therefore customers would pay less interest.
When asked why an investor-owned utility should be allowed to issue state tax-exempt bonds, Swank pointed out that companies like FPL do not receive state or federal reimbursements for damages caused by storms.
Municipal utilities and electric cooperatives are eligible to receive funding from the Federal Emergency Management Agency and the state, he said.
In addition, commercial insurance for utilities virtually dried up after Hurricane Andrew devastated South Florida in 1992. That forced most utilities to implement self-insurance plans for their transmission and distribution facilities.
Thats why this kind of bill is only a benefit to investor owned utilities that dont have access to an additional method of paying off damage costs, Swank said. This provides a more level playing field out there.
While the state is not pledging any funds to pay the storm-recovery bonds, the state tax exemption permitted by HB 303 could have an impact on gross receipts tax and intangible tax revenues, the bill analysis said.
The state relies on gross receipts tax revenues to fund several state programs, but Gov. Jeb Bush is proposing to abolish the intangibles tax on stocks and bonds within a year.
HB 303 also contains a pledge from the state that it will not alter certain provisions, or take or permit any action that would impair the value of storm recovery property or reduce, alter, or impair storm recovery charges until the storm recovery bonds and all related charges have been paid in full.
Florida legislative committees have been meeting since late last year to hear testimony on proposed bills in preparation for the current session.
Bensons HB 303 passed the House Utilities and Telecommunications Committee on Feb. 22 and now is scheduled to be heard by the Finance & Tax Committee.
SB 1366, a companion bill to Bensons, was filed by Sen. Lee Constantine, R-Seminole County, a real estate consultant and broker who chairs the Senate Communications and Public Utilities Committee where SB 1366 currently is being considered.
Other bond bills being considered by the Florida Legislature include SB 862 and its companion, HB 1085, creating the nonprofit Educational Loan Marketing Corp. to provide a secondary market for student loans in the state. The corporation would issue tax-exempt bonds and seek funds from private sources to provide the loans.
HB 55 and its companion, SB 470, would allow counties with fewer than 50,000 residents to levy a one-cent indigent-care sales tax that could be pledged to new or existing bonds that finance, plan, construct, or reconstruct a public or not-for-profit hospital. The bill would allow 26 counties to implement the tax if approved by local referendum. Larger counties in Florida have similar authority under current law.
