Florida Power & Light Co.'s proposed $690 million-a-year rate increase, adding 16 percent to the current base rate, will be vigorously opposed by the Florida Office of Public Counsel and a conservative group.
With a series of nine public hearings set to conclude by month's end, J.R. Kelly sees "no way" FPL's full request is valid, and if past is prologue, the Public Service Commission will chop the utility's rate bid significantly.
For residential customers, the FPL plan would hike the base rate portion of a typical bill by $6.97 per 1,000 kilowatts per month, Kelly's office says.
FPL spokeswoman Elaine Hinsdale has a significantly lower calculation. She says customers would pay only a net increase of about 5 cents more per day.
The utility's filing this year is consistent with its notice to the PSC in January that an adjustment is needed because the existing rate agreement, which effectively froze base rates for three years, expires at the end of 2012.
FPL expects that, even with the proposed hike, its customer bills will still be the lowest in the state and well below the national average.
FPL is seeking to boost its rate of return on equity capital to 11.5 percent, but Kelly calls that "excessive and unreasonable."
Since the PSC granted a 10 percent ROE in 2010, Kelly's office says the cost of capital has decreased and has recommended a 9.25 percent in other utility cases.
Each 1 percent increment of ROE translates into an additional $130 million to $140 million from FPL's 8 million ratepayers.
Kelly says his office is still researching the FPL request and expects to issue a final recommendation July 2. His two key concerns center on the return on equity and on the capital structure of FPL's parent company, NextEra Energy Inc.
Specifically, Kelly's office is examining FPL's proposed salaries and benefits; the reasonableness of affiliate charges; the utility's projections of customers, revenues and expenses; and the prudence of the company's expenses related to plant modifications and upgrades.
In 2010, FPL requested a rate increase in excess of $800 million. The PSC eventually granted $75 million.
"They seemed to do fine with that, completing projects, with a good credit rating and access to credit markets," Kelly said.
A conservative political group, Americans for Prosperity, has jumped into the rate case on behalf of consumers.
"FPL has a monopoly on its services -- they have no competition and have a guaranteed return on investment currently of 10 percent," said Slade O'Brien, AFP's Florida state director.
Meantime, O'Brien points out, shareholders of FPLs parent company NextEra received a 22 percent return in 2011, and NextEra's profits increased 72 percent in the first quarter of 2012.
"This certainly begs us to ask -- why is a rate increase needed?" said O'Brien.
FPL officials say their company has a history of tightening its belt. But O'Brien says the utility's 2011 CEO compensation of $14.8 million "doesn't seem like belt-tightening to us."
"At a time where the average consumer is lucky to receive 1 percent return on their savings, if they have any savings at all, it is outrageous that FPL can ask for such an unfounded and egregious rate increase," O'Brien said.
FPL notes that its typical residential customer bill is 13 percent lower today than it was in 2006, and that business customers' charges have decreased, on average, about 14 percent over the same period.
"Most small businesses, which comprise more than 80 percent of all commercial customers in FPL's territory, would see little change in their bills in 2013," the company said in a statement.
In a separate case, FPL's request for "advance cost recovery" for two additional nuclear reactors proposed at Turkey Point is scheduled to be heard by the PSC this fall.
Contact Kenric Ward at kward@sunshinestatenews.com or at (772) 801-5341.
