Regulators agree to give FPL four-year rate deal

Herald/Times Tallahassee BureauDecember 13, 2012 

TALLAHASSEE -- The Public Service Commission approved a controversial settlement agreement with Florida Power & Light on Thursday that raises rates starting in January, gives the company $350 million more a year, and allows for two additional increases in the next four years.

But the decision will also likely draw a lawsuit from the lawyer who represents consumers in rate cases, the Office of Public Counsel. He has vigorously objected to the settlement as a one-sided bad deal for customers that violates the regulator's own rules.

"Even with the modifications they made today, we don't believe this settlement is anywhere near where it needs to be,'' said J.R. Kelly, head of the Office of Public Counsel.

He argued that FPL is making more profit than should be allowed and urged regulators to reduce FPL's base rates, not increase them. "We will look to file an appeal," to the Florida Supreme Court, Kelly said.

Customers will not see their bills increase until June, as a drop in fuel costs absorbs most of the rate increase. In January, the typical residential customer who uses 1,000 kilowatt hours of electricity a month will see his bill drop about 37 cents a month to about $94.25 as a $4.13 decrease in fuel charges offsets the $3.76 base rate increase.

In June, when the company puts into service its Cape Canaveral power plant, it will be allowed to raise rates again, this time increasing rates about $1 per month for the 1,000 kilowatt hour per month customer. The company will raise rates an estimated $2 more per month in 2014 and about $2 again in 2016 as power plants in Rivera Beach and Port Everglades come online. None of the rate changes will require PSC approval.

The accord was hailed by the five-member PSC, which unanimously approved the deal after the company agreed to reduce its original settlement request of $378 million by $28 million.

"At the end of the day, I believe this is a good deal for consumers and it's a good deal for the company,'' said Commission Chairman Ron Brise, a former legislator from Miami.

FPL said that the agreement will help it provide customers predictability in its bills and allow it to keep its earnings steady as it brings the power plants into service. It also gives the company the ability to avoid another expensive and contested rate case before 2016.

"By helping us keep bills low and reliability high, this four-year rate agreement is a win for all of our customers now and in the years ahead," said FPL President Eric Silagy.

The settlement will allow FPL to receive guaranteed profits of between 9.5 to 11.5 percent through 2016.

The base rate is less than the company originally sought but the profit level -- which would guarantee a midpoint return on equity of 10.5 percent -- is higher than the 10 percent the PSC staff recommended in a draft proposal. FPL, a regulated monopoly with 4.6 million customers in Florida, is currently making profits of about 11 percent, the most allowed under the current rate settlement agreement, which expires in January.

The PSC decision Thursday marks the first time the commission has moved forward on a rate settlement without the public counsel's consent. Kelly told the Herald/Times he fears the decision will encourage other utility companies to circumvent his office and approach the commission with a settlements that favor only a small number of customers.

FPL side-stepped the public counsel when it entered into its agreement with Florida Industrial Power Users Group, the South Florida Hospital and Healthcare Association and the Federal Executive Agencies just as the company's rate case was scheduled to begin in August.

The decision provoked criticism from consumer advocate, AARP.

"While AARP is pleased that consumers aren't stuck with an even larger bill, we are troubled that state utilities regulators have allowed any rate increase without the concurrence of the official voice of Florida utilities consumers, the Office of Public Counsel," said AARP Florida State Director Jeff Johnson. He called on the Florida Legislature to decide whether the practice was good public policy.

This is also the first major rate case decided by this commission for FPL, the state's largest utility, since the legislature unseated four members of the previous commission when it rejected most of a $1 billion rate increase request in 2009.

The current commission sided with FPL on the most controversial issues, with Commissioners Art Graham and Lisa Edgar forcefully defending major parts of the modified settlement.

Commissioner Eduardo Balbis prepared a list of issues that he hoped would be considered by commissioners to reduce the settlement amount and, he said, tilt it more "to the public interest."

None of the other commissioners agreed. After the commission took a break, FPL and its settlement partners agreed to lower their total request to $350 million and put $18 million in additional relief toward residential customers. Balbis said the change "alleviated my concerns,'' and the vote was unanimous.

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