NextEra Energy subsidiary Florida Power & Light (FPL) on Jan. 11 said that it has notified the Florida Public Service Commission that the company expects to file a formal request in the coming months for new base rates, with the rate proposal expected to include an adjustment in 2022 to base annual revenue requirements of about $1.1bn.
FPL said that it expects the proposal to also include:
- A subsequent year adjustment in 2023 to base annual revenue requirements of about $615m
- A request in 2024 and 2025 for a Solar Base Rate Adjustment (SoBRA) mechanism to recover up to 900 MW of cost-effective solar projects in each year. If the full amount of new solar capacity allowed under the SoBRA proposal was built, the company’s preliminary estimate is that it would result in general base rate adjustments of about $140m in 2024, and $140m in 2025, which would be partially offset by a reduction in fuel costs on the clause portion of customer bills
The company said that the total of those rate increase requests over the four-year period from 2022 through 2025 would result in an estimated average increase in total revenue of less than 3.7% per year. FPL said that the phased-in rate adjustments are necessary to help pay for the more than $29bn that the company is investing from 2019 through 2022 to benefit customers, including improving electric service reliability, reducing emissions and improving generation fuel efficiency, strengthening its electric system to make it more resilient in severe weather, and preparing for customer growth.
As noted in the Jan. 11 filing submitted to the commission, NextEra in 2019 acquired Gulf Power Company from Southern Company, and the merger of Gulf and FPL was approved by FERC last October. FPL said that it and Gulf are now engaged in the process of integrating operations in a manner that maximizes the benefits for the unified company, with Gulf formally merging into FPL this month; operational consolidation will be essentially complete by January 2022. The consolidated company will be well positioned to continue to improve the level of service for all customers, while maintaining rates that are below the national average, FPL said.
Noting that it is mindful of the many challenges caused by the COVID-19 pandemic, FPL said that it has taken steps to help mitigate the economic effects of the pandemic on particular groups of customers, with those measures including the company’s Main Street Recovery Credit Program, which was approved by the commission and provides financial relief to qualifying small businesses in the form of a 10% discount on their monthly energy consumption.
Discussing test years, FPL said that for its 2022 base rate request, it proposes to use the projected 12-month period ending Dec. 31, 2022, as the test year with the adjusted rates to be effective upon the first day of January 2022. For the proposed 2023 subsequent year adjustment, FPL said that it will use the projected 12-month period ending Dec. 31, 2023, as the test year, with the adjusted rates to be effective upon the first day of January 2023.
The company also discussed examples of incremental investments, noting that it has experienced growth in its customer base and expects to add about 498,000 customers from 2018 through 2025. While that growth has a positive impact by spreading existing fixed costs over a larger customer base, it also means that FPL must invest significant additional capital to meet the needs of those additional customers in building out such infrastructure as poles, wires, and transformers.
Among other things, FPL said that it will propose to set its approved return on common equity (ROE) midpoint at 11.5%, which the company said reflects an estimated cost of equity of 11.0% and an ROE performance incentive of one-half percent.