NextEra Energy (NYSE: NEE) subsidiary Florida Power & Light (FPL) has reached a proposed agreement with customer advocacy groups that should help secure a pending FPL rate request to help fund new natural gas generation in Florida.
The proposed agreement was filed with the Florida Public Service Commission (PSC) Aug. 15 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,” said FPL President Eric Silagy in a statement.
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 $378m base rate increase in January 2013.
The utility is replacing existing fossil generation at those sites with “next generation” natural gas power plants. For example, the plant will be capable of producing 1,250 MW of electricity or enough to power 250,000 homes and businesses, according to an FPL project website. The same goes for Riviera Beach and Port Everglades.
The cost of each of the three plants is in the $1bn neighborhood, said an FPL spokesperson.
The 2013 revenue requirement for Cape Canaveral, which will come online in June 13, is approximately $170m. 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 $1bn in fuel and other costs over and above their cost of construction during their operating lifetimes, according to the utility.
As part of the proposed settlement, FPL would reduce its revenue request beginning in January 2013 by about 25%, from $517m to $378m, primarily through a reduction in the company’s requested return on equity from 11.5% to 10.7%. 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%t ROE is slightly below the average allowed ROE of 10.75% for the state’s investor-owned utilities, excluding FPL, and well below the average allowed ROE of 11.52% 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.