Electric Rates Will Go Up 8% on Jan. 1, and 13% by 2018 as Regulators Approve FPL Settlement

State regulators Tuesday unanimously approved a settlement agreement that includes $811 million in base-rate increases for customers of Florida Power & Light — with $400 million slated to take effect Jan. 1.

FPL, which early this year proposed $1.3 billion in rate increases, negotiated the settlement with representatives of consumers and two business groups. The Florida Public Service Commission approved the agreement despite continuing objections from the senior-advocacy group AARP and the Sierra Club.

Commissioner Ronald Brise said the settlement addressed issues regulators heard from consumers during meetings across the areas served by FPL. Most electricity customers in Flagler County are served by FPL. 

“One is that the quality of the (FPL) service is good. People were concerned about their pockets,” Brise said. “And I think ultimately, this settlement handles all of those things, and it allows for the service to continue in a way that people will continue to receive the satisfaction that they are looking for and that their pockets won’t be injured in the process, while allowing the growth that is necessary to occur.”

In addition to the $400 million increase slated to take effect Jan. 1, the agreement calls for a $211 million increase in January 2018 and a $200 million increase in mid-2019 when a new Okeechobee County power plant starts operating.

The settlement addresses numerous other issues, including potential solar-energy projects for FPL and a halt on a controversial financial practice known as “hedging” prices of natural gas. It also includes a target return on equity — a measure of profit — of 10.55 percent for FPL.

AARP argued in a filing last month that the utility’s rates should decrease by $300 million in 2017, not increase. Earlier this year, the state Office of Public Counsel, which represents consumers, also argued that FPL’s rates should go down.

But the Office of Public Counsel ultimately reached the settlement with FPL, as did the Florida Retail Federation and the South Florida Hospital and Healthcare Association, which were parties in the rate case.

“In any given case, you have to evaluate the risks of you winning your positions and losing your positions,” state Public Counsel J.R. Kelly said after the vote Tuesday. “At the end of the day, we came together with the other signatories and Florida Power and Light, and we felt this was a reasonable resolution to all of the issues.”

Eric Silagy, president and chief executive officer of FPL, said the agreement will allow the utility to continue making “smart investments” that will help ensure relatively low bills for consumers and provide other benefits such as clean emissions from power plants. He said FPL has had the lowest electric bills in the state during the past several years and pointedly used that to address AARP’s objections.

“We’ve been able to keep prices low and reliability high, and that benefits every single AARP member,” Silagy said after the vote.

But Jeff Johnson, AARP Florida’s state director, issued a statement calling the settlement approval “an early Christmas present for FPL.”

“Today’s decision demonstrates what observers of Florida utilities regulation have long believed — this system is simply not hearing the voices of residential consumers,” Johnson said. “Until this imbalance is addressed, the interests of Florida residential ratepayers will come last and those of out-of-state shareholders will come first.”

Base rates make up a major portion of electric customers’ monthly bills, with other portions involving costs such as power-plant fuel.

A common industry benchmark is a residential customer who uses 1,000 kilowatt hours of electricity a month. With the settlement approved Tuesday and other changes, such FPL customers will see their bills go from $91.56 to $99.02 in January, according to information from the utility. Those bills are estimated to go to $102.50 in January 2018 and $103.70 when the Okeechobee County plant starts operating, projected for June 2019.

The Public Service Commission spends months on base-rate cases, with staff members and commissioners wading through extensive financial and technical information and holding hearings — a process in the FPL case that Commissioner Jimmy Patronis likened to a “meat grinder.”

But the settlement agreement, announced in October, cut short some of the decisions regulators would have been forced to make about FPL’s original proposal for a larger rate increase. Commission Chairwoman Julie Brown said the agreement will provide “predictability” for consumers.

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

–Jim Saunders, News Service of Florida