FPL, customer groups reach agreement on proposal to help secure low rates for four years
Customer bills are projected to remain the lowest in the state and well below the national average
JUNO BEACH, Fla., Aug. 15, 2012 /PRNewswire-FirstCall/ -- Florida Power & Light Company and key customer advocacy groups today announced a proposed agreement regarding the company's pending rate request that would help secure low rates for customers through the end of 2016 while supporting FPL's ability to provide safe, highly reliable service.
The proposed agreement was filed with the Florida Public Service Commission (PSC) today in a joint request by FPL and representatives of the Florida Industrial Power Users Group (FIPUG), the South Florida Hospital and Healthcare Association (SFHHA) and the Federal Executive Agencies (FEA) for Commission approval.
"We are pleased to propose a solution that would limit the increase for the typical residential customer to about 4 cents a day, including changes in base rates, fuel and other components of the bill. Under this proposed settlement, our customers are projected to continue to have the lowest typical bills in the state along with reliability and an emissions profile that are among the best in the country," said FPL President Eric Silagy.
If approved by the PSC, the agreement will provide for base rate increases covering the capital and operating costs of new power plants at Cape Canaveral, Riviera Beach and Port Everglades when these plants go into service as expected in 2013, 2014 and 2016, respectively, together with a $378 million base rate increase in January 2013. The 2013 revenue requirement for Cape Canaveral, which will come online in June, is approximately $170 million. At the same time these new plants go into service, customers will see decreases in the fuel portion of their bills that will significantly offset base rate increases. Combined, the new, more efficient power plants are projected to save customers more than $1 billion in fuel and other costs over and above their cost of construction during their operating lifetimes.
As part of the proposed settlement, FPL would reduce its revenue request beginning in January 2013 by about 25 percent, from $517 million to $378 million, primarily through a reduction in the company's requested return on equity from 11.5 percent to 10.7 percent. The remaining amount will offset the impact of the run-off of accelerated surplus depreciation amortization ordered by the PSC in 2010. The proposed 10.7 percent ROE is slightly below the average allowed ROE of 10.75 percent for the state's investor-owned utilities, excluding FPL, and well below the average allowed ROE of 11.52 percent for other investor-owned utilities in the southeastern coastal United States. In addition, except as contemplated within the agreement, FPL will not seek any additional base rate increases for the four-year duration of the settlement agreement, provided its earnings remain within the allowed range.
Impact on Customer Bills
Lower projected fuel costs would minimize the projected bill impact for all customer classes when base rates are increased in 2013.
While FPL cannot control future fuel prices, its investments in efficient new power generation reduce overall fuel usage, which in turn lowers overall bills no matter what the price of fuel is. Industry experts agree that dramatic increases in the supply of natural gas in the U.S. are likely to keep natural gas prices moderate for many years to come. More than half of FPL's fuel supply comprises natural gas.
FPL's total residential customer bill is down 13 percent from 2006 to 2012 as a result of investments in more efficient power generation, the beneficial impact of lower fuel prices and the company's strong cost controls. Typical commercial customer bills are down 14 percent over the same period. Under the proposed settlement, residential and most commercial bills are still projected to be down 12-16 percent, respectively, in 2013 as compared to 2006.
Under the terms of the proposed agreement, the typical 1,000-kWh residential customer bill is projected to increase by 93 cents per month, or about 3 cents per day, beginning in January 2013. When the new Cape Canaveral plant goes into service in June 2013, the bill would increase an estimated additional 28 cents a month, for a total combined increase of $1.21 per month, or about 4 cents a day. This equates to a 1.3 percent net increase.
Total typical bills for most commercial customers are projected to be flat to down 3 percent in January 2013 with most small business customers, representing 80 percent of all commercial customers, realizing a decrease.
As part of the agreement, FPL would increase its energy conservation credits to large commercial/industrial customers for load interruptions. As a result, total bills for customers who participate in the Commercial and Industrial Load Control program are projected to decrease by up to 10 percent, including the impact of lower fuel costs. The Commercial and Industrial Load Control program benefits all customers by helping FPL avoid the necessity of building costly additional peaking facilities.
Helping Florida's Economy
All parties to the proposed agreement said it would benefit Florida's consumers and economy by keeping bills low, reliability high and promoting economic development.
"This agreement will provide Florida's largest industrial and commercial customers with predictable rates for the next four years, something that is important as the Florida economy emerges from the Great Recession. It is a fair deal that FIPUG strongly supports and, as reflected in today's filings, joins FPL, key hospitals in South Florida and important military installations in jointly asking the Commission to consider and approve," said Jon Moyle, representing FIPUG.
"This agreement helps secure low rates for four years not only for South Florida hospitals, but for all FPL customers, providing rate stability despite an uncertain economy. We believe it represents a responsible course for all parties," said SFHHA President Linda Quick.
"We appreciate the willingness of these major advocacy organizations to work with us to craft a fair and balanced solution for Florida," said FPL's Silagy. "The success of their members is essential to economic recovery in Florida, and we are pleased to partner with them in a way that supports continued success for them and for our state."
"We worked collaboratively with customer advocates to develop an approach that provides both commercial and residential customers with significant benefits by helping secure low rates for the next four years. Our customers will continue to receive bills that are the lowest in the state and well below the national average under the terms of this agreement. At the same time, the agreement provides us with a predictable, stable rate structure that will help us plan for the future and keep investing for the benefit of our customers. Our combination of low bills, high reliability, excellent customer service and low emissions is the best in the state today, and we are committed to improving it and keeping it the best for many years to come," Silagy said.
Florida Power & Light Company
Florida Power & Light Company is the largest electric utility in Florida and one of the largest rate-regulated utilities in the United States. FPL serves approximately 4.6 million customer accounts and is a leading Florida employer with approximately 10,000 employees. The company consistently outperforms national averages for service reliability while its typical residential customer bills, based on data available in December 2011, are about 25 percent below the national average. A clean energy leader, FPL has one of the lowest emissions profiles and one of the leading energy efficiency programs among utilities nationwide. FPL is a subsidiary of Juno Beach, Fla.-based NextEra Energy, Inc. (NYSE: NEE). For more information, visit www.FPL.com.
Cautionary Statements and Risk Factors That May Affect Future Results
This press release contains "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical facts, but instead represent the current expectations of NextEra Energy, Inc. (NextEra Energy) and Florida Power & Light Company (FPL) regarding future operating results and other future events, many of which, by their nature, are inherently uncertain and outside of NextEra Energy's and FPL's control. In some cases, you can identify the forward-looking statements by words or phrases such as "will," "will likely result," "expect," "anticipate," "believe," "intend," "plan," "seek," "aim," "potential," "projection," "forecast," "predict," "goals," "target," "outlook," "should," "would" or similar words or expressions. You should not place undue reliance on these forward-looking statements, which are not a guarantee of future performance. The future results of NextEra Energy and FPL are subject to risks and uncertainties that could cause their actual results to differ materially from those expressed or implied in the forward-looking statements. These risks and uncertainties include, but are not limited to, the following: effects of extensive regulation of NextEra Energy's and FPL's business operations; inability of NextEra Energy and FPL to recover in a timely manner any significant amount of costs, a return on certain assets or an appropriate return on capital through base rates, cost recovery clauses, other regulatory mechanisms or otherwise; impact of political, regulatory and economic factors on regulatory decisions important to NextEra Energy and FPL; risks of disallowance of cost recovery by FPL based on a finding of imprudent use of derivative instruments; effect of any reductions to or elimination of governmental incentives that support renewable energy projects of NextEra Energy Resources, LLC and its affiliated entities (NextEra Energy Resources); impact of new or revised laws, regulations or interpretations or other regulatory initiatives on NextEra Energy and FPL; effect on NextEra Energy and FPL of potential regulatory action to broaden the scope of regulation of OTC financial derivatives and to apply such regulation to NextEra Energy and FPL; capital expenditures, increased cost of operations and exposure to liabilities attributable to environmental laws and regulations applicable to NextEra Energy and FPL; effects on NextEra Energy and FPL of federal or state laws or regulations mandating new or additional limits on the production of greenhouse gas emissions; exposure of NextEra Energy and FPL to significant and increasing compliance costs and substantial monetary penalties and other sanctions as a result of extensive federal regulation of their operations; effect on NextEra Energy and FPL of changes in tax laws and in judgments and estimates used to determine tax-related asset and liability amounts; impact on NextEra Energy and FPL of adverse results of litigation; effect on NextEra Energy and FPL of failure to proceed with projects under development or inability to complete the construction of (or capital improvements to) electric generation, transmission and distribution facilities, gas infrastructure facilities or other facilities on schedule or within budget; impact on development and operating activities of NextEra Energy and FPL resulting from risks related to project siting, financing, construction, permitting, governmental approvals and the negotiation of project development agreements; risks involved in the operation and maintenance of electric generation, transmission and distribution facilities, gas infrastructure facilities and other facilities; effect on NextEra Energy and FPL of a lack of growth or slower growth in the number of customers or in customer usage; impact on NextEra Energy and FPL of severe weather and other weather conditions; risks associated with threats of terrorism and catastrophic events that could result from terrorism, cyber attacks or other attempts to disrupt NextEra Energy's and FPL's business or the businesses of third parties; risk of lack of availability of adequate insurance coverage for protection of NextEra Energy and FPL against significant losses; risk to NextEra Energy Resources of increased operating costs resulting from unfavorable supply costs necessary to provide NextEra Energy Resources' full energy and capacity requirement services; inability or failure by NextEra Energy Resources to hedge effectively its assets or positions against changes in commodity prices, volumes, interest rates, counterparty credit risk or other risk measures; potential volatility of NextEra Energy's results of operations caused by sales of power on the spot market or on a short-term contractual basis; effect of reductions in the liquidity of energy markets on NextEra Energy's ability to manage operational risks; effectiveness of NextEra Energy's and FPL's hedging and trading procedures and associated risk management tools to protect against significant losses; impact of unavailability or disruption of power transmission or commodity transportation facilities on sale and delivery of power or natural gas by FPL and NextEra Energy Resources; exposure of NextEra Energy and FPL to credit and performance risk from customers, hedging counterparties and vendors; risks to NextEra Energy and FPL of failure of counterparties to perform under derivative contracts or of requirement for NextEra Energy and FPL to post margin cash collateral under derivative contracts; failure or breach of NextEra Energy's and FPL's information technology systems; risks to NextEra Energy and FPL's retail businesses of compromise of sensitive customer data; risks to NextEra Energy and FPL of volatility in the market values of derivative instruments and limited liquidity in OTC markets; impact of negative publicity; inability of NextEra Energy and FPL to maintain, negotiate or renegotiate acceptable franchise agreements with municipalities and counties in Florida; increasing costs of health care plans; lack of a qualified workforce or the loss or retirement of key employees; occurrence of work strikes or stoppages and increasing personnel costs; NextEra Energy's ability to successfully identify, complete and integrate acquisitions; environmental, health and financial risks associated with NextEra Energy's and FPL's ownership of nuclear generation facilities; liability of NextEra Energy and FPL for significant retrospective assessments and/or retrospective insurance premiums in the event of an incident at certain nuclear generation facilities; increased operating and capital expenditures at nuclear generation facilities of NextEra Energy or FPL resulting from orders or new regulations of the Nuclear Regulatory Commission; inability to operate any of NextEra Energy Resources' or FPL's owned nuclear generation units through the end of their respective operating licenses; liability of NextEra Energy and FPL for increased nuclear licensing or compliance costs resulting from hazards posed to their owned nuclear generation facilities; risks associated with outages of NextEra Energy's and FPL's owned nuclear units; effect of disruptions, uncertainty or volatility in the credit and capital markets on NextEra Energy's and FPL's ability to fund their liquidity and capital needs and meet their growth objectives; inability of NextEra Energy, FPL and NextEra Energy Capital Holdings, Inc. to maintain their current credit ratings; risk of impairment of NextEra Energy's and FPL's liquidity from inability of creditors to fund their credit commitments or to maintain their current credit ratings; poor market performance and other economic factors that could affect NextEra Energy's and FPL's defined benefit pension plan's funded status; poor market performance and other risks to the asset values of NextEra Energy's and FPL's nuclear decommissioning funds; changes in market value and other risks to certain of NextEra Energy's investments; effect of inability of NextEra Energy subsidiaries to upstream dividends or repay funds to NextEra Energy or of NextEra Energy's performance under guarantees of subsidiary obligations on NextEra Energy's ability to meet its financial obligations and to pay dividends on its common stock; and effect of disruptions, uncertainty or volatility in the credit and capital markets of the market price of NextEra Energy's common stock. NextEra Energy and FPL discuss these and other risks and uncertainties in their annual report on Form 10-K for the year ended December 31, 2011 and other SEC filings, and this press release should be read in conjunction with such SEC filings made through the date of this press release. The forward-looking statements made in this press release are made only as of the date of this press release and NextEra Energy and FPL undertake no obligation to update any forward-looking statements.
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