Flagler Residents Would See $84-a-Year Jump in FPL’s Base Rate Despite Solid Profits
FlaglerLive | March 20, 2012
Florida Power & Light filed a detailed proposal Monday to raise base electric rates by $690.4 million in 2013, setting the stage for months of hearings and financial scrutiny by regulators and customer groups.
The typical residential customer who uses 1,000 kilowatt hours of electricity a month would see an increase of $6.97 a month, or $83.64 a year. Most of Flagler County’s residential and commercial connections are to FPL.
FPL says the increase would be offset, at least in the first year, by an estimated cut in the fuel-cost portion of the bill. FPL is estimating the monthly cut at $4.49, or $53.88 a year, thanks in large part to plummeting natural gas prices. So the net increase for a residential customer would be $2.48, or $29.76 a year, if the the proposal is approved, according to FPL. Fuel costs are passed on to customers and can fluctuate considerably. If, for example, the cost of natural gas increases again next year, the effect of the nearly $7-a-month increase, if approved, would be more pronounced.
The filing with the state Public Service Commission comes about two months after FPL said it would seek an increase in base rates. Florida’s largest utility said it should receive the additional money for a number of reasons, including a new power plant in Brevard County and the need to upgrade its transmission systems and other infrastructure.
“FPL’s requested base rate increase is necessary to allow FPL to meet cost pressures and sustain investment in a way that will continue to produce superior value for customers,” the utility’s petition to the PSC said.
Customer groups are preparing to dissect the proposal and argue about whether it is justified, with the Florida Retail Federation, the South Florida Hospital and Healthcare Association and the Florida Industrial Power Users Group already seeking to formally intervene in the case. Also, the state Office of Public Counsel will represent consumers.
“The interests of the many members of the (Florida Retail Federation) who are FPL customers will be directly affected by the commission’s decisions in this case, and accordingly, the (federation) is entitled to intervene to protect its members’ substantial interests in receiving safe, adequate and reliable electric service at the lowest possible cost,” the 9,000-member retail-industry group said in a document filed last month with the PSC.
Commissioners likely will make a decision late this year on the proposal, with a first phase of rate increases expected to take effect in January 2013. The second phase would start in June 2013, when the new Cape Canaveral plant begins operating.
Base rates are 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.
FPL, which says it has the lowest electric rates in the states, would be able to partially offset the higher base rates because of reduced fuel costs. Natural gas is projected to remain relatively cheap, and FPL Vice President Mike Sole said projects such as the Cape Canaveral plant will increase energy efficiency — which will help hold down fuel costs.
Sole said adjustments in the way rates apply to different types of customers could lead to small businesses seeing reductions in their bills, though larger commercial users would see increases.
A heavily debated issue during the case likely will be the level of investor returns that should be built into the rates.
FPL has proposed an 11.25 percent “return on equity” — a closely watched measurement of profitability — that would increase to 11.5 percent if the utility’s rates remain the lowest in the state. The company argues it needs to offer such returns to attract investors to help finance costly projects.
FPL’s parent company, NextEra Energy, posted a net profit of 17.3 percent in the fourth quarter of 2011, and an overall net profit margin of 12.5 percent in 2011, with a return on average equity of 17.94 percent in the fourth quarter and 13 percent for the year. FPL itself saw its net profit rise to $216 million in the fourth quarter, , or $0.51 per share, compared with $181 million in the prior-year quarter–a 19 percent jump. For the full year, net income was $1.07 billion, compared with $945 million, a 13 percent increase over 2010.
But consumer and business groups recently fought an 11.7 percent return-on-equity proposal in a Gulf Power Co. rate case. The PSC last month set the Pensacola-based utility’s targeted return at 10.25 percent.
Sole, however, said FPL faces more risks than Gulf, in part because it is making larger investments in infrastructure and because its service area is in the peninsular part of the state. That could make it more difficult to recover from hurricanes.
“Each company is somewhat different in their needs and their risks,” said Sole, a former secretary of the Florida Department of Environmental Protection.
–News Service of Florida and FlaglerLive