Get Set for Higher Power Bills in January as FPL Bids for Annual Increases Through 2016

While hoping regulators will approve a controversial settlement proposal, Florida Power & Light gave notice this week that it plans to increase base rates in January. The overwhelming majority of electricity customers in Flagler County are FPL customers. FPL says a house consuming the typical 1,000 kWh would see its base monthly rate  increase by $5.23. The increase may be lowered in subsequent months to $4.1 a month, if the settlement proposal is approved.

The net effect of the base-rate increase will not be as dramatic, however, because monthly fuel and other charges will be going down in January, by $3.78, at least for now. (Fuel charges are notoriously volatile.) That means the net increase for the typical monthly residential bill will be $1.45. If the settlement is approved, there would actually be no change in net costs to customers in the coming year, but the settlement would also ensure that there would be rate increases every year for three straight years thereafter.

The Florida Public Service Commission on Dec. 13 will decide whether to approve the settlement proposal, which FPL reached with major power users in August. That proposal would lead to a $378 million base-rate increase, which would take effect Jan. 16. But if the settlement is not approved, FPL said in a regulatory filing that it plans to move forward Jan. 2 with an earlier proposal to increase base rates by $516.5 million. The Public Service Commission has put that proposal on hold while it considers the settlement. Under state law, FPL can move forward with the $516.5 million rate increase while a decision remains pending. That is because regulators did not act on the proposal within eight months of its filing.

If the Public Service Commission later determined that the $516.5 million increase was not justified, FPL would have to refund money to customers. FPL says either rate increase would have relatively little impact on residential customers’ monthly bills.

The Public Service Commission held a two-day hearing this week on the proposed settlement. The state Office of Public Counsel, which represents consumers in utility issues, has fought the settlement and the earlier $516.5 million rate proposal. The office contends FPL’s base rates should decrease — not increase — by as much as $253 million next year.

But as state regulators weigh the controversial settlement proposal, they also will have to consider hundreds of millions of dollars in additional rate hikes that would come later for new power plants.

The proposed settlement builds in base-rate increases during the next four years to help pay for power-plant projects at Cape Canaveral, Riviera Beach and Port Everglades. FPL has argued that the recent installation of smart meters across Florida, including in Flagler County, while controversial, would reduce the need for additional power plants in the future by making the power grid more efficient.

Robert Barrett, FPL’s vice president of finance, testified Tuesday that the additional increases — known in utility lingo as “generation base rate adjustments,” or GBRAs — are an “essential component of this agreement.” He said customers would get certainty about how much they will pay in the coming years, while the efficient new plants would help reduce the amounts that FPL — and customers — spend on natural gas for generation.

“GBRA is in the best interest of customers,” Barrett said.

But the state Office of Public Counsel and other opponents of the proposed settlement argue FPL should have to file additional rate cases before it can get increases for the plants. They say that would allow the Public Service Commission to further scrutinize the utility’s operations and finances to determine if rate increases are needed during the four-year period.

“Talk about rate certainty,” Associate Public Counsel Joseph McGlothlin said during opening arguments before the commission Monday. Under the proposed settlement, he said, “it is certain that rates will go up during that time frame.”

The commission held marathon meetings Monday and Tuesday to hear testimony about the proposed settlement agreement, which FPL announced in August with representatives of industrial power users, south Florida hospitals and federal agencies such as military bases. The proposal is opposed by the state Office of Public Counsel, which represents consumers in utility cases, and groups such as the Florida Retail Federation.

Commissioners likely will make a decision on the proposal in December. They scheduled three days of testimony this week, but worked late into the evening Monday and expected to do the same Tuesday as they tried to get done in plenty of time for Thanksgiving.

“It is going to be a long haul today,” commission Chairman Ronald Brise said as Tuesday’s hearing started shortly after 9 a.m.

The proposed settlement has been highly controversial, in part, because FPL announced it just days before the commission was scheduled to start a hearing in August on a $690.4 million rate proposal that the utility filed earlier in the year. The settlement also is controversial because the Office of Public Counsel has not agreed to it.

The Office of Public Counsel argues that the utility’s base rates should decrease — not increase. — by as much as $253 million next year. If the commission rejects the settlement, it then likely will decide in January whether to approve the original $690.4 million rate proposal.

The proposed settlement includes a complex mixture of financial issues. One controversial part of the settlement, for example, would allow FPL to earn a 10.7 percent “return on equity,” a closely watched measure of profitability.

Another key part is the potential future base rate increases for the new power plants. Under the proposal, FPL would receive a $378 million base-rate increase in January, with an additional $165.3 million increase in June when the Cape Canaveral plant starts operating.

That could be followed by a $236 million increase after the Riviera Beach plant starts operating in 2014 and a $218 million increase after the Port Everglades plant cranks up in 2016, according to information presented at Tuesday’s hearing.

At least next year, the proposed settlement would have relatively little impact on customers’ monthly bills. Even after the increase for the Cape Canaveral plant in June, residential customers who use 1,000 kilowatt hours of electricity a month would see increases in their bills of slightly less than $1, FPL says.

That is largely because the base-rate increases would be offset by reductions in power-plant fuel costs, which are a separate part of customers’ overall bills. It is more difficult to project the amounts of customer bills in later years because of uncertainty about costs such as fuel.

None of those rate increases would include additional rate increases calibrated to FPL’s projected nuclear power-plant construction.

–News Service of Florida and FlaglerLive