FP&L Asks For $690.4 Million Base-Rate Increase

Mar 21, 2012 No Comments by

Florida Power & Light Co. on Monday began the months-long process of asking the Florida Public Service Commission to grant it a $690.4 million rate hike for 2013.

FPL President Eric Silagy said the company has worked hard to reduce expenses and improve reliability, customer service and its emissions profile. FPL is asking for $516.5 million of the increase to take effect Jan. 2, and for the remaining $173.9 million to kick in when its new Cape Canaveral plant comes into service in June 2013.

“We are asking to be treated fairly,” Silagy said. “We have the lowest bill in the state, the highest reliability, the cleanest emissions profile, and yet we have the lowest return on equity granted to any electric utility in the last 50 years in the state of Florida.”

Customer hearings are expected to take place around the state in late spring or early summer, with a rate case before the PSC following in late summer or early fall.

“We will have to get down into the weeds of the filing. We will contest anything we do not believe is justified,” Florida Public Counsel J.R. Kelly said Monday. The public counsel is the consumer advocate in utility rate cases.

FPL is requesting a base rate increase of $6.97 a month, or about 23 cents a day, on the base portion of a typical 1,000-kilowatt-hour residential customer bill. The base rate would jump from $43.26 now to $50.23 in June 2013, a 16 percent increase.

For the next year, FPL estimates show, the increase would be offset by a $4.49-a-month net decrease in other components of a typical bill, including lower fuel usage, lower fuel prices and other adjustments. As a result, the typical residential customer bill would increase about $2.48 a month, or about 8 cents a day – a 2.6 percent increase in the bill .

The addition of more efficient generating units and other improvements has cut fuel costs by $5.5 billion from 2001 though 2011, Silagy said.

Fuel increases and decreases are passed through to the customer. The base rate is a permanent charge.

The company’s latest request to increase base rates – what customers pay, other than fuel, to produce and deliver electricity, such as operating power plants, maintaining the grid and providing customer service – is expected to be closely scrutinized by the PSC and by intervenors in the rate case.

In 2009 the PSC reduced FPL’s $1.3 billion rate hike request to $75 million and also reduced its requested rate of return on equity, or profits, from 12.5 percent to an authorized midpoint return of 10 percent. FPL considered an appeal but ultimately settled with state regulators in December 2010. That settlement expires at the end of this year.

Of the five PSC commissioners serving today, only one, Lisa Edgar, was in office then.

As part of the rate case, FPL is asking that the midpoint of its authorized rate of return on equity be raised to 11.25 percent, with a “performance adder” of another 0.25 percent if FPL’s typical residential bill continues to remain the lowest in the state.

“Nobody is immune to inflationary pressure,” Silagy said. “Like any other business, we have had an increase in operation and maintenance expenses and added new customers.”

A higher rate of return is needed to vie for capital in the market, he said.

Kelly said the return-on-equity request is too high, and having the state’s lowest electric rates is not a basis for raising return on equity.

“They did say if they did not get that billion-dollar rate increase (in 2009), it would diminish their ability to provide safe and reliable service and their access to credit and debt markets,” Kelly said. “None of that came to pass. They got 7 percent of what they asked for.”

A decline in fuel costs doesn’t justify a rate increase, said Jon Moyle, an attorney representing the Florida Industrial Power Users Group . “It is apples and oranges,” he said.

New rates, like new taxes, are imposed by government, and decision­-makers should keep that in mind, Moyle said. “Both are used to fund monopolies, either a utility company or government. The ratepayer/taxpayer has little choice whether to pay them or not.”

Source: Palm Beach Post

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