FPL pitches rate settlement
By Jim Saunders
The News Service of Florida
THE CAPITAL, TALLAHASSEE, FL – Thursday, August 15, 2012……… Just days before the start of a possibly contentious hearing before state regulators, Florida Power & Light said Wednesday it will seek approval of a settlement agreement that would increase customers’ base electric rates next year by $548 million.
FPL, the state’s largest utility, reached the proposed settlement with groups representing large electricity users and scaled back an earlier proposal to raise base rates by about $690 million in 2013.
Mike Sole, an FPL vice president, said the proposed four-year agreement would provide stability for the company and customers, particularly as the utility moves forward with building three new power plants. The increase would take effect in two phases next year and, residential customers’ monthly bills ultimately would be expected to go up about 1.3 percent.
But the proposed settlement immediately drew criticism from the state’s Office of Public Counsel, which represents consumers in utility cases. The office, along with another group involved in the FPL rate case, the Florida Retail Federation, objects to the settlement and contends that FPL’s rates should decrease — not increase — next year.
“We will not sign onto this settlement,” Public Counsel J.R. Kelly said. “We do not believe it is in the best interest of ratepayers.”
The Florida Public Service Commission is scheduled Monday to start detailed, highly technical hearings about whether FPL’s base rates should increase. The company filed its original proposal early this year, touching off a months-long process of analyzing information and taking public input.
FPL reached the proposed settlement with the Florida Industrial Power Users Group, a business organization that frequently intervenes in utility cases, the South Florida Hospital and Healthcare Association and federal agencies that are large power customers.
With the public counsel and the retail federation opposed to the settlement, it was not immediately clear how the Public Service Commission will deal with the issue Monday. FPL is seeking to temporarily suspend the rate hearing.
Sole, a former secretary of the Florida Department of Environmental Protection, said he hopes the public counsel and retail federation will agree to the settlement, calling it a “win for all the customers.”
“Under this proposed settlement, our customers are projected to continue to have the lowest typical bills in the state, along with reliability and an (air) emissions profile that are among the best in the country,” FPL President Eric Silagy said in a prepared statement.\
Under the proposal, FPL would receive a $378 million base-rate increase in January and would receive roughly another $170 million increase in June 2013, when a new power plant at Cape Canaveral starts operating. Under its original proposal, FPL would have received a $516.5 million increase in January and a $173.9 million increase in June.
FPL also could later receive increases when new plants are finished in 2014 in Riviera Beach and in 2016 at Port Everglades.
Base rates are a a major part of customers’ monthly electric bills and cover many day-to-day operations of utilities. They do not include other expenses such as power-plant fuel and environmental-compliance costs.
Kelly said his office thinks FPL’s rates should decrease by $253 million. Also, he said it has concerns about the additional increases that could go along with the new plants.
A key issue in the case and in the proposed settlement is the “return on equity” — a key measure of profitability — that FPL would be allowed to receive. FPL and other utilities have long argued they need healthy returns on equity to help attract investors to finance costly projects.
In its original proposal, FPL proposed an 11.25 percent return on equity that could increase to 11.5 percent if the utility’s rates remain the lowest in the state. The settlement agreement targets a return on equity of 10.7 percent, though Kelly argued it should be set at 9 percent.