Regulators will require Florida Power & Light to refund $365 million to customers in January for lower-than-expected fuel costs this year and last. That works out to a one-time credit of $44 to $50 for monthly household electric bills.
Commissioner Nathan Skop proposed the idea of speeding up the refund -- which FPL wanted to provide in small amounts over a full year -- at a hearing Monday in Tallahassee on the utility's request for $4.8 billion in fuel fees, environmental costs and other expenses next year. The commission unanimously approved both the refund and the requested surcharges.
"The pro is you put money back in consumers' pockets" faster, Skop said, noting that the utility refunded $138 million in fuel costs during the last three months of 2001. "This is about two and a half times greater."
The $4.8 billion in FPL surcharges comprise about half of an FPL customer's bill and would amount to about $44.85 a month for a typical household for the first 1,000 kilowatt-hours of power used. That compares with $7.2 billion this year about $64 per month for a typical household according to FPL.
In addition, FPL is proposing a $1.27 billion annual base rate increase.
The fuel refund for January comes in the wake of some FPL critics' questioning why the utility did not lower customer bills this year since fuel costs nationwide have dropped since mid-2008.
The quicker refund will hurt FPL's argument that lower fuel costs will offset the impact of the proposed base-rate increase on customer bills. If the PSC were to approve the $1.27 billion base rate increase, in addition to the $4.8 billion in new fuel costs, utility officials have said the typical monthly household electric bill for an FPL residential customer would decline by $7 next year.
That would only be true if projected costs for natural gas and oil don't increase next year. If fuel prices were to rise significantly and the PSC approved the base rate increase, FPL has projected a residential customer's monthly bills could increase by up to $10 and $13 for the first 1,000 kilowatt-hours of power used.
Public Counsel J.R. Kelly, the state-appointed utility consumer advocate, has not challenged the bulk of $4.8 billion request but opposes allowing FPL to pass to customers $6.1 million in replacement power costs because of a massive outage in February 2008. Last year, the office helped win a $6 million refund to customers for costs related to a 2006 outage.
FPL will pass the following costs to customers in 2010 through the surcharges:
$3.9 billion for fuel, including oil and natural gas for power plants.
$577 million to buy power when demand is higher than usual such as after a power-plant shutdown or a heat wave that stresses the power grid. This surcharge would include $63 million in nuclear planning costs the commission already approved.
$180 million for programs to encourage customers to use less electricity.
$169 million for reducing environmental costs such as power plants' greenhouse gas emissions.
Most states allow surcharges so utilities can pass certain costs to customers without base rate hearings, which typically happen every few years. Some of the surcharges help meet goals set by lawmakers like reducing greenhouse gas emissions or conserving energy that utilities may not do otherwise.
The Florida Industrial Power Users Group, which represents businesses, has called the fees a "boon" to utilities. FPL spokesman Mayco Villafana said the surcharges prevent the company from having to change rates too often, which creates unpredictability for customers. Utilities aren't allowed to earn a profit on the surcharges, except on capital projects included in the fees.
Ted Kury, the director of Energy Studies at the University of Florida's Public Utility Research Center, said the "pass-through" charges lower utilities' risk, which lowers the cost of borrowing money for projects. That should save customers money in the long run.
"But that's a very hard benefit to quantify, and that makes it frustrating for ratepayers who want to see the benefit to them. Ultimately, the PSC has to make sure that they're getting that benefit," Kury said.
A spike in fuel costs in July 2008 led Florida utilities to boost the fuel fees they passed on to customers this year and last. But natural gas prices dropped sharply since then. Progress Energy Florida lowered fuel costs in April and Tampa Electric Co. lowered them in May.
The commission required Progress to file a report in March of this year on how declining fuel costs are affecting its fuel costs but did not require the same of FPL, the state's largest utility.
