TALLAHASSEE, Fla. -- Regulators rejected opposition from the state's consumer advocate on Thursday and approved a base rate increase for Florida Power & Light Co. that may add nearly $10 to a typical residential customer's monthly bill over a span of four years.
It's part of a settlement between FPL, the state's biggest electric utility, and groups representing industrial, health care and federal government customers that won unanimous approval from the Public Service Commission.
"It's a great deal for customers," FPL President Eric Silagy said in an interview. "All customers benefit from this whether they are commercial or residential."
Silagy said the deal, which will increase base rates by $350 million in the first year, will help pay for new, more efficient power plants that will save customers billions in the long run and complete the company's move from heavy reliance on oil to cleaner-burning natural gas. Even with the increase, FPL's rates will remain the lowest in Florida.
Public Counsel J.R. Kelly wasn't part of the settlement and said he's leaning toward appealing what he says is a bad deal for most customers to the Florida Supreme Court. Kelly had proposed a $253 million rate reduction. The Florida Retail Federation joined him in opposing the deal.
The state consumer advocate contends the settlement violates state law because his office is not part of it. Kelly is charged with representing all utility customers while parties to the settlement represent less than 1 percent of the 4.6 million homes, businesses and other customers served by FPL in South Florida and on the state's east coast.
The agreement will raise the residential monthly base rate for 1,000 kilowatt hours, which is considered about average, by $3.76 in January. It'll go up by about another $1 in June when the first of three new power plants goes into operation. Figures haven't been calculated yet, but two more new plants in 2014 and 2016 will result in additional increases.
Residential customers, though, in January are expected to see average monthly bills drop by 37 cents to $94.62 because of previously approved cuts in fuel and other annually adjusted changes even after the base rate increase. Company officials say they expect additional fuel savings in the future to at least partly mitigate the additional base rate increases.
Rates will be essentially flat or decrease in January for most business customers. They'll again remain flat or decrease about 3 percent in June.
FPL and the other settling parties originally submitted an agreement calling for a $378 million January increase but they agreed to reduce it by $28 million after the commission suggested some changes. The additional power plants may expand the revenue total into the neighborhood of $900 million by the end of 2016.
"It doesn't appear to do a whole lot different than the first proposal," Kelly said. "The modifications that the commission threw out on the table we don't believe honestly are in the public interest."
The most significant change reduced FPL's allowed rate of return paid to investors from 10.7 percent to 10.5 percent. Those are mid-range figures with the top and bottom limits a percentage point higher and lower.
"We're achieving something that allows FPL to have access to capital to make these significant changes," said Commissioner Eduardo Balbis, referring to the new plants. "These are tangible benefits to the customers."
FPL currently is earning an 11 percent return and Kelly had proposed 9 percent based on the utility's high equity ratio that makes it a low-risk investment.
Silagy, though, said other factors such as vulnerability to hurricanes and the utility's four nuclear plants increase FPL's risk.
"The public counsel proposed a return on equity that would have been the lowest of any utility in the nation," Silagy said. "So, you've got to really look at that and say `How serious is that?'"
The revised settlement also keeps FPL's late payment charge at $5 instead of increasing it to $6.
The agreement was offered in place of a $690 million base rate proposal FPL had originally filed.
The commission's approval comes nearly three years after the panel rejected nearly all of a $1.2 million FPL rate request. In short order, though, four of those five commissioners were ousted. The Florida Senate refused to confirm two of them and a nominating panel appointed by legislative leaders refused to consider two others for reappointment.
Then-Gov. Charlie Crist and the former commissioners contended they were deposed because of their rejection of rate increases sought by FPL and Progress Energy Florida.
"Approving the FPL proposed settlement agreement effectively marks the end of any meaningful utility regulation in the state of Florida," said Nathan Skop, one of the ex-commissioners.