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Front Page » Top Stories » Fpl Rate Hike May Cost Commercial Tenants More In April

Fpl Rate Hike May Cost Commercial Tenants More In April

Written by on March 6, 2003

By Paola Iuspa
Some commercial and industrial tenants will see their electricity bills rise in April after the state’s Tuesday approval of FPL’s request to raise fees to cover oil and natural gas costs.

It is most likely that property managers will pass the increase on to their tenants, said Brian Gale, managing director of brokerage services for Taylor & Mathis. The Atlanta-based commercial real estate company develops, markets and manages office buildings, mixed-used projects and business and industrial parks.

Unless their contracts specify otherwise, tenants absorb fee increases in insurance, security and utilities, known as uncontrollable expenses.

Bill Swank, an FPL spokesman, said the Florida Public Service Commission voted in favor of granting FPL the 7.3% increase in commercial and 11.6% increase in industrial bills. The new fees take effect April 1 and will extend through December, when they will be reviewed, he said.

Brent Shepherd, a property manager with the Allen Morris Co., a real estate group, said offices annually spend $1.25 to $1.75 per square foot for electricity. A 3,000-square-foot office that now pays in electricity $1.75 per square foot will see an annual increase of $390, said Scott Strickland, a leasing manager with Jones Lang LaSalle, a real estate firm.

FPL’s proposal also called for residential bills to rise 6.2%. For example, a 1,000-kilowatt-hour monthly residential bill would jump $4.75 to $81.60, from $76.85, according to the company.

A combination of US and world events are driving up oil and gas prices, inflating FPL’s expenses, Mr. Swank said. FPL’s projected average costs for natural gas and oil in 2003 will be 16% and 8% higher than originally calculated in November, he said.

The energy company estimates its annual budget at the end of the year, but this adjustment was needed to keep up with oil prices that are rising as a war with Iraq looms. A higher-than-expected consumption of gas in the North is also affecting the natural gas price, Mr. Swank said.

Currently, FPL primarily uses natural gas, nuclear energy and oil to power the generators that produce electricity for its 4 million accounts in Florida.

Energy consultant Joe GarcÌa, who from 1994 to 2000 was chairman of the Florida Public Service Commission, said members tend to give FPL this kind of request, because the company won’t profit from it.

"The increase is driven by the energy cost," said Mr. GarcÌa, president of Archon Consulting, "and is based on a mathematical formula with very little flexibility."

Consumers opposing the increase can follow a legal process and appeal the commission’s decision. But they would need to prove the oil and gas prices didn’t go up or that FPL erred when formulating the new fees, Mr. GarcÌa said.

FPL won’t profit from increased fuel costs, which it passes directly to customers following the commission’s review and approval, Mr. Swank said.

Mr. Shepherd said some property managers may chose not to pass the cost on to tenants and try to reduce other building expenses such as janitorial or elevator services.

Steve Smith, director of leasing with The Hogan Group, manager of the Waterford at Blue Lagoon, said his company would pass that increase on to its tenants, as it currently does with insurance premiums.

Mr. Strickland said increases in uncontrollable expenses often are passed directly on to tenants. But he said leases can be different and terms vary from one tenant to another.

Mr. Gale said the electric cost increase would make the existing "challenging environment" more difficult for property owners. "It makes it a challenge for landlords to have a good yield in their investments."