Florida Power & Light customers will see their utility bills rise by $400 million beginning in January after state regulators approved a 2017 rate increase Tuesday, to be followed by $411 million in rate hikes in the next three years.
The monthly increase for a customer that uses 1,000 kilowatt hours would be about $9.50 by 2020, starting with $5 more next year, another $2.50 in January 2018 and about $2 in June 2019 when the Okeechobee Clean Energy Center begins powering customers. The total is less than the $13.23 increase FPL initially projected.
The unanimous ruling by the Florida Public Service Commission was part of a settlement of the rate case FPL agreed to with opponents in October in which FPL backed off its $1.3 billion rate request in return for the four-year rate guarantees.
The agreement was endorsed by the Florida Public Counsel, the lawyers representing utility customers, the South Florida Hospital and Healthcare Association and the Florida Retail Federation. The Florida chapter of the Sierra Club and AARP opposed it. Wal-Mart stores opposed the proposed profit level but did not argue against the agreement. The federal executive agencies, including the military, and the Florida Industrial Power Users Group did not oppose the settlement but also did not sign onto it.
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Opponents argued that FPL has been charging customers to build expensive natural gas back-up plants it shouldn't need, and the agreement allows it to upgrade another 26 natural gas turbines.
The Sierra Club contends, for example, that if the utility giant stopped fighting the expansion of rooftop solar and other alternative forms of energy, its customers would save money and FPL could wean 70 percent of its fleet from its dependence on climate-change-inducing fossil fuels. AARP argues that the company should not be guaranteed excessive profits at the expense of customers.
The commission did not address any of the opponents’ concerns and instead lauded the agreement as good for the customers and good for FPL.
“Taken as a whole, and given the amount of broad support across the customer groups that signed on, the settlement ... produces rates that are fair just and reasonable and in the public interest,” said PSC Chair Julie Brown. She commended FPL for “smart, prudent decisions” that have led to the lowest rates in the state.
FPL President and CEO Eric Silagy said after the ruling that the agreement “benefits all of our customers by ensuring rates continue to remain low for at least the next four years while also enabling continued smart investments in reliability and clean energy.”
Brown said there are “a great deal of customer protections in this agreement.” Among them, she said, are limiting rate increases to four years, providing customers with more predictability, allowing FPL to invest in 1,200 megawatts of utility-scale solar expansion — which must be approved by the commission with a cost-effectiveness test — and the elimination of the natural gas hedging practice of buying fuel that for years resulted in millions of dollars in losses and enormous expense for customers.
“It allows for the service to continue ... and that their pockets won’t be injured in the process while allowing the growth that is necessary to occur,” said Commission Ronald L. Brisé. He noted that during the numerous public hearings the public said they wanted a greater emphasis on renewable energy and the settlement allows for that.
Frank Jackalone, staff director for the Sierra Club’s Florida chapter, said they were “very disappointed that the commission approved this huge rate hike for unnecessary, climate-disrupting, gas-burning power plants.” He also said the decision “contradicts the will of Florida’s voters” who voted down FPL’s attempt to pass an amendment that would have imposed limits on rooftop solar expansion.
The company invested more than $8 million into the political campaign behind the effort that was rejected by voters.
Under the settlement approved Tuesday, FPL shareholders also will be able to earn higher profits from the monopoly utility. The company currently is allowed to earn a return on equity — or shareholder profits — of 10.55 percent within a range of 9.6 percent to 11.6 percent.
If the amount of revenue the company has to return to shareholders dips below 9.6 percent, FPL will be able to ask for a new rate case. If the shareholder profits are above 11.6 percent, the PSC can ask for the rate case to order the company to lower its profit structure.
In June, FPL reported to regulators that it was earning an 11.5 percent ROE. FPL’s initial rate request sought a profit range of 10.5 percent to 12.5 percent ROE, including an incentive bonus that would have rewarded the company for “good performance.”
Jeff Johnson, director of AARP Florida, said the decision “demonstrates what observers of Florida utilities regulation have long believed — this system is simply not hearing the voices of residential consumers.”
He said the public has lost confidence in the “broken system” and noted that “even before this ruling, FPL stood to make $1.6 billion in profit over the next four years” but with the guaranteed profits allowed by the settlement, “FPL gets even more.”
“Until this imbalance is addressed, the interests of Florida residential ratepayers will come last and those of out-of-state shareholders will come first,” he said.
Brown noted that “it’s a challenging time in an industry that continues to evolve,” and “utilities need to be at the forefront of this.”
FPL has also agreed to build as much as 300 megawatts of solar power per year over four years, but the cost will be capped at $1,750 per kilowatt. It will invest in a 50-megawatt battery storage project that could be combined with the solar projects. And it is authorized to transfer to an affiliated company the ownership of the Martin-Rivera natural gas pipeline
Brown commended the battery-storage plan and said, “I really hope we get to see more investment like this from utilities.”
The company, however, will be able to charge customers for those added investments by asking the commission to raise base rates after the utility-scale solar projects are completed.
Commissioner Lisa Edgar called the settlement comprehensive and “this shows that the process ultimately works.”
FPL is barred from seeking any other rate increases until 2021 under the settlement, but the plan allows regulators to increase the company’s rates for the solar expansion and other projects. This is also not likely to be the only utility rate increase FPL customers face in 2017.
For example, the PSC staff said FPL is expected to seek a rate increase to replenish its storm reserve after depleting it during the clean up of Hurricane Matthew. If the costs do not exceed $800 million and are not greater than $4 for the average 1,000-kwh residential bill, the company will be allowed to add the costs to customer bills without a rate hearing. If the costs exceed $800 million, the PSC can spread the charges over more than a year.
This story has been updated to clarify some references.