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FPL Asks for 23.7% Multi-Year Base Rate Hike

January 26, 2016 By Cheryl Kaften

The largest utility in the Sunshine State, Florida Power & Light (FPL) is getting ready to ask for a base rate hike of $860 million, effective January 2016; as well as subsequent yearly adjustments of $265 million in January 2018; and $200 million in mid-2019, when a new plant comes online.

The utility outlined its plans in a letter, dated January 15, addressed to Chairman Julie Brown of the Florida Public Service Commission.

The “ask” by FPL (Docket No. 1600021-El) would raise the bills of its 4.7 million customers by 23.7 percent by 2019, a $1.3 billion increase. However, the utility claims, the total request over the four-year period beginning in 2017 and extending through 2020 would reflect an estimated average increase in total revenue of less than 3 percent per year.

For a typical residential 1,000 kilowatt-hour (kWh) monthly bill, FPL CEO Eric Silagy said, “We estimate that the 2017 base rate adjustment would be about $8.50 per month. The subsequent year base rate adjustment in 2018 would be about $2.50 per month, and the Okeechobee Clean Energy Center limited-scope base rate adjustment would add about $2.00 per month in 2019.”

Project construction on the Okeechobee natural gas-fired plant– anticipated to offer a generating capacity of approximately 1,600 megawatts (MW) – is slated to start in early 2017 and to take nearly two years to complete. For the proposed limited scope base rate adjustment, the company will use the projected costs of the Okeechobee center’s first 12 months of operation – currently projected to be June 1, 2019, to May 31, 2020 with the adjusted rates to be effective upon the first day of its commercial operation.

“FPL’s typical residential bill today is about 20 percent lower than the state average and about 30 percent lower than the national average, and we expect it will continue to be among the lowest even with these proposed adjustments,” commented Silagy.

The utility currently is operating under a four-year rate settlement agreement that began in January 2013 and expires at the end of December 2016.

Over a period of the last 17 years, Silagy said, “the utility has entered into five multi-year settlement agreements that have provided customers with a degree of rate stability and certainty, while at the same time ensuring that FPL continues to have a strong credit rating and balance sheet that enable us to consistently raise capital on very attractive terms.”

This financial stability provides the necessary platform for the company to continue to meet customer needs, he said – from day-to-day operations and customer service to major storms or financial market disruptions.

Indeed, he explained, the utility needs the money “ – including improvements to 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.

Silagy assured the commission, “We are mindful of the potential impact on customers of any increase- even for a company such as FPL – with bills that are projected to remain among the lowest in the state and nation – and so we have made the decision to seek rate relief only after a very thorough review of financial projections.”

However, consumer advocates are not so sure. A lawyer for the Florida Industrial Power Users Group (FIPUG), which has intervened in previous rate cases, told the Miami Herald that the organization will carefully review the need for the increased rates and higher profits.

“While FIPUG appreciates the service FPL provides to its members and more than half of the state’s homes and businesses, a rate increase request of more than $1.3 billion with a requested equity return of 11.5 percent, are significant requests that will warrant close and careful scrutiny from the Public Service Commission, the Office of Public Counsel, FIPUG and other parties representing consumer interests,” Jon Moyle told the news organization.

FPL said it would make its formal filing in March.

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