PSC rejects most of Florida Power & Light’s request to raise rates by $1 billion this year

Most of Florida Power & Light rate hike rejected

TALLAHASSEE, Fla. — State regulators under pressure from politicians and consumer advocates Wednesday rejected more than 99 percent of Florida Power & Light Co.’s request to raise base rates by $1 billion this year and all of a $247 million proposal for 2011.

In response, FPL said it will immediately suspend projects representing approximately $10 billion of investment over the next five years in Florida’s energy infrastructure.

The Public Service Commission approved $75 million for 2010 in a case enmeshed in politics and accusations the panel had been too close to the utilities it regulates, leading to a pair of staff resignations.

The increase is expected to add only 5 cents to the bills of residential customers using 1,000 kilowatt hours a month, which is about average for a small home.

Overall, though, consumers this year will pay at least $15 a month less for that usage level — about $95 — due to a November decision that reduced added charges for fuel, conservation and other specific expenses.

The decision affecting Florida’s largest electric utility came just two days after the commission refused to raise rates for the state’s second-largest power company — Progress Energy Florida.

“Politics trumped economics,” FPL president Armando Olivera said.

The projects that FPL are suspending would have created an estimated 20,000 direct and indirect construction and related jobs over the next five years, a news release from the company said.

Projects it said it will immediately suspend are:

— Developing two new nuclear reactors at Turkey Point beyond what is required to receive a license from the Nuclear Regulatory Commission;

— Modernizing the Riviera Beach and Cape Canaveral plants;

— The proposed Florida EnergySecure natural gas pipeline;

Gov. Charlie Crist, who’s in a tight race for the Republican U.S. Senate nomination, had spoken out against both proposed rate increases. Crist also asked for, and the commission approved, delays in each case until his two newest appointees to the five-member panel took office — one in October and the other earlier this month.

Neither has ties to utilities nor prior experience regulating them. Crist selected them over two incumbents who had sought reappointment. The governor said rate increases would be an excessive burden for recession-battered consumers.

“The times that we are in affect both companies,” said David Klement, one of the new commissioners. “We know that our consumers in this market are hurting.”

After the Progress Energy decision, Crist said he thought Klement, a former journalist, and his other new appointee, Benjamin “Steve” Stevens, an accountant, made a difference.

“That’s probably an understatement,” Crist said on Tuesday. “I’m happy for consumers.”

Several other politicians also opposed increasing rates. They include Republican Attorney General Bill McCollum and Democratic Chief Financial Officer Alex Sink, both candidates for governor.

The commission’s staff recommended a $357 million increase for this year — about a third of what the company had sought.

Public Counsel J.R. Kelly, who represents consumer interests, instead urged a $1.3 billion rate cut. AARP and other consumer groups lobbied against the company’s request. A bus load of seniors wearing AARP T-shirts watched part of the commission’s deliberations.

The panel decided dozens of policy issues before arriving at a revenue figure.

That included setting a 10 percent midpoint on FPL’s allowed rate of return on equity, or profit margin, with a minimum of 9 percent and maximum of 11 percent. The company asked for a 12.5 percent midpoint and commission staffers recommended 10.75 percent.

The panel’s rate of return decision reduced the staff’s revenue recommendation by $83 million.

“Utilities are just going to have to make due in these difficult economic times,” said Commissioner Nathan Skop.

He said FPL is a financially solid, low-risk company.

Fitch Ratings, though, put FPL on a negative rating watch after Monday’s Progress Energy decision, saying that was a sign FPL also would have a “poor outcome.”

FPL’s rate or return is even lower than the 10.5 percent midpoint the commission set for Progress Energy.

The commission also trimmed $77 million from the staff proposal by deciding FPL should return its entire depreciation surplus to consumers over the next four years instead of just a portion as staffers had recommended.

Another key decision was to suspend the collection of money from customers for a storm repair reserve fund. That reduced the staff recommendation by another $50 million. FPL had sought $150 million a year for the fund that’s now at $215 million.

The Juno Beach-based utility serves about 4.5 million homes, businesses and other customers in South Florida and along the state’s east coast.

Progress Energy, which has more than 1.6 million customers in central and north Florida, had asked for a $500 million increase. The commission approved $132 million on an interim basis last year. The panel made that portion of the increase permanent Monday but refused to raise rates any further.