Florida Politics
November 29, 2016


PSC approves compromise $811 million rate increase for Florida Power

Michel Moline



The Public Service Commission on Tuesday approved a compromise rate increase for Florida Power & Light Co. that will cost customers $811 million over four years.

The utility had sought $1.3 billion, but agreed to the compromise with large customers and the Office of Public Counsel, which represents ratepayers before Florida’s utility regulating body.

The commission vote was unanimous.

The agreement provides for a $400 million rate increase to take effect on Jan. 1. A customer using 1 kilowatt of electricity each month can expect to pay an extra $63.49.

Rates would increase by $211 million in January 2018, which will work out to $65.88 per month.

Rates would increase by an additional $200 million on June 1, 2019, to bring online the Okeechobee Clean Energy Center, a new, high-efficiency generating plant.

FPL agreed to abandon natural gas hedging, or buying future supplies based on what the utility estimates the price might be. The public counsel’s office estimates that bad bets have cost customers $6.5 billion since 2002.

In addition, the deal calls for the power company to invest in energy alternatives including solar and battery technology.

AARP, the Sierra Club, the Florida Industrial Power Users Group, and a number of federal agencies declined to join the settlement, although Public Counsel J.R. Kelly endorsed it.

“There is a great deal of customer protection in the agreement,” PSC chairwoman Julie Imanuel Brown said.

“Taken as a whole, and given the amount of broad support across the customer group that signed on the settlement, I do believe it produces rates that are fair, just and reasonable and are clearly in the public interest,” Brown said.

Commissioner Ronald Brisé agreed the agreement would ensure good service to consumers and that “their pockets won’t be injured in the process.”

Brisé was not sure the hedging language was prudent, but said: “This is a compromise settlement, where you have parties who have come together and addressed the concerns that they have, and have come to an agreement that makes sense and they can live with.”

Kelly, whose office originally argued that FPL should roll back rates by $600 million dollars, said the deal was justified.

“We were able to include certain issues in there and the commission could not have decided during the rate case,” he said. “Such as the elimination of hedging, the solar portion, and a couple of other aspects.”

The Sierra Club complained that the agreement would leave FPL overly reliant on natural gas derived from hydraulic fracturing.

In a letter to the panel, deputy director Nachy Kanfer expressed concern that “FPL asking customers to fund more gas-burning power plants that are neither necessary, nor a good value given competitive alternatives in the market such as solar power and energy storage, which FPL has repeatedly acknowledged can lower the cost of service.”

Eric Silagy, president and chief executive officer of FPL, said the agreement would allow the utility to replace 48 1970s-era jet aircraft engines.

“These are engines that used to be n Boeing 707s,” Silagy said. “These are very old aircraft engines we are now replacing with high-efficiency, very clean, six natural gas-driven engines that will be able to provide more electricity, more reliably, and much cleaner.”

The deal allows rates lower than FPL originally sought by tinkering with its allowed return on investment and depreciation of plants and equipment. It allows the company to earn as much as 11.6 percent, although the target is 10.55 percent.

“Such a scheme for manipulating returns has never been allowed by the commission outside of a settlement, and no legal precedent exists for it outside of a settlement,” AARP complained in a letter to the commission.

Silagy argued such returns are financially necessary. “The key is to be able to attract investors,” he said. “The credit rating agencies and Wall Street believe this is an appropriate level for us to continue to be able to move forward.”

Regarding solar power, the company can bring online no more than 300 megawatts of solar capacity during each year of the agreement.

“They’re not given a blank check,” Kelly said. “They have to come in and prove that any solar project is going to save the customers money.”