The senior-advocacy group AARP contended Thursday a proposed settlement that would lead to increases in base electric rates for customers of Florida Power & Light would be a boon to stockholders, though the hikes would be lower than what the utility originally sought.
However, FPL argued to the state Public Service Commission that the proposed $811 million in increases over three years — included in a settlement with a state consumer advocate and two groups that challenged the original request — would provide customers with predictable rates and would help expand the company’s use of solar energy.
Michael Brosch, who is president of the consulting firm Utilitech, Inc. and who testified on behalf of AARP, said the utility’s projected profits would be stronger under the proposed settlement “all at ratepayers’ expense.”
The settlement would allow FPL to annually receive up to an 11.6 return on equity, a measure of profit. Brosch said that would assure the company a “stronger financial performance” than could be earned through “traditional rate regulation.”
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Brosch said FPL hasn’t made financial forecasts for the years after 2018 to back the need for increases. Instead, he said FPL customers should get a single rate reduction in 2017, with the company having to come back in subsequent years for any further rate changes as costs become more certain.
“There is simply no way to accurately determine the company’s actual financial needs for four years into the future,” Brosch said.
FPL initially requested base rates increase $1.3 billion over three years, claiming a need to cover nearly $16 billion invested since 2014 to improve electricity service, reduce emissions, improve fuel efficiency and strengthen the system against severe weather.
Under the proposed settlement, FPL is asking regulators to approve rates that would generate an additional $400 million in 2017, rather than the $826 million originally sought.
The proposal would generate an increase of $211 million in 2018, down from the $270 million previously proposed, and $200 million in 2019, instead of $209 million.
The 2019 money would be tied to the start of a new Okeechobee County power plant, scheduled to come online June 1, 2019. There would be no increase requested for 2020 under the settlement.
The Public Service Commission would have to approve the settlement, and a decision is expected by December.
The state Office of Public Counsel, which represents consumers in utility issues, the Florida Retail Federation and the South Florida Hospital & Health Association agreed to the settlement. The retail and health-care groups often are involved in utility cases.
“The proposed agreement would allow us to build on our track record and support investments that would further improve service reliability, allow us to restore power even faster, and make our system cleaner and more efficient,” FPL spokeswoman Alys Daly said.
Robert Scheffel Wright, an attorney representing the Florida Retail Federation, said the settlement was reached through extended discussions and represents “a reasonable and hugely acceptable resolution of … many complex issues.”
No position was taken on the settlement by the Florida Industrial Power Users Group, which represents major commercial customers, Wal-Mart and Sam’s Clubs stores, and federal agencies including military bases. Each of those parties intervened in the case.
AARP, the Sierra Club and the Loxahatchee couple Daniel and Alexandria Larson oppose the proposed settlement.
Under the settlement, residential customers using 1,000 kilowatt hours of electricity a month would see their overall bills go from the current $91.56 to $98.77 in January. By 2020, those monthly bills, excluding franchise fees, would be at $102.97.
The settlement would allow FPL to petition to build up to 300 megawatts of solar power a year during the life of the agreement if the company can prove the addition would be cost-effective.
The company previously anticipated building 224 megawatts of solar in the four years.
“This is an exciting and aggressive rollout,” Public Service Commission Chairwoman Julie Brown said.
Meanwhile, FPL would agree not to engage in new “hedging” on natural-gas prices during the term of the agreement.
FPL has used the practice known as hedging to lock in prices on some of its natural gas purchases. Natural gas comprises most of the fuel used by FPL to run its plants. Critics have argued that hedging hasn’t been cost effective.
News Service of Florida assignment editor Tom Urban contributed to this report