Florida Power & Light notified regulators Tuesday that it wants to increase base rates by $695 million next year, as the utility prepares to open a new power plant and faces growing infrastructure costs.
The notification is the first step in a months-long process that will involve the state Public Service Commission and representatives of consumers and business groups examining FPL's finances.
If ultimately approved, $525 million of the increase would start showing up in customers' bills in January 2013, and the rest would take effect in June 2013 when a new Cape Canaveral power plant starts operating. FPL says projects such as the new plant improve efficiency, which helps hold down long-term costs for customers.
"Our customers have the lowest bills in the state, and we have reliability that is among the best in the country,'' said Mike Sole, FPL vice president for governmental affairs.
But in a five-page letter to the PSC, the utility also acknowledged the effect of potential increases on customers.
"We know there is never a good time for an increase, and we are particularly mindful of the difficult economy and its impact on our customers and the state,'' the letter said. "We made the decision to seek rate relief only after a very thorough review of financial projections and we have worked hard to minimize the financial impact to customers.''
Base rates make up only a portion of customers' monthly bills, which also reflect such costs as power-plant fuel and environmental improvements. But base-rate increases are one of the most controversial issues that the PSC addresses, as hearings delve deeply into utility operations and profits.
Progress Energy Florida --- the state's second-largest utility behind FPL --- also is expected to file a base-rate case early this year. Meanwhile, the PSC is scheduled to decide next month whether to approve a base-rate increase for Gulf Power Co., which serves much of the western Panhandle.
A key issue in the FPL case likely will center on how much money the company should be able to earn. In the letter, it says it will seek a potential return on equity --- a common measurement of profitability --- of 11.25 percent and wants to also be able to earn an additional 0.25 percent if it maintains the lowest customer bills in the state.
The company argues, at least in part, that such returns are necessary to help attract investors to finance costly projects.
But if the Gulf Power case is an indication, representatives of consumers and business groups could argue that an 11.25 percent return is excessive. The state Office of Public Counsel, which represents consumers in utility cases, contends in the Gulf case that a proper level should be 9.25 percent.
Also, Public Counsel J.R. Kelly said Tuesday he doesn't think it is legitimate to allow FPL to earn an additional 0.25 percent for keeping its customers' bills the lowest in the state.
"That should not be any part of the equation at all,'' Kelly said.
FPL and Progress faced tumultuous hearings the last time they sought base-rate increases. Those hearings led to 2010 settlement agreements that are set to expire at the end of 2012.
In its letter Tuesday, FPL offered a number of reasons for seeking the rate increases. Along with paying for the Cape Canaveral plant, other examples of costs include adding poles, wires and transformers to help handle an expanded customer base.
FPL also says in the letter that the monthly impact on customers would be partially offset by lower projected costs for such things as fuel. Currently, an FPL residential customer pays $94.62 a month for 1,000 kilowatt hours of electricity, a common measurement in the utility industry.
The base-rate increases would add about $6.80 to that monthly bill. But when fuel and other factors are taken into consideration, the increase would shrink to about $3 a month, according to FPL.
Reach Jim Turner at jturner@sunshinestatenews.com or at (772) 215-9889,
