The Florida Public Service Commission unanimously approved a comprehensive four-year rate settlement agreement developed jointly by Florida Power & Light Co., the state's Office of Public Counsel and customer advocacy organizations.
The agreement is expected to keep FPL's typical bills lower than they were in 2006 through at least the end of 2020.
The agreement takes effect in January 2017 and will support continued investments in FPL's infrastructure, including the implementation of technologies that help reduce and shorten outages, generate power more efficiently and curtail fuel consumption and air emissions. FPL has been investing an average of about $3.5 billion a year in its infrastructure and expects to continue investing at a similar rate for the next four years.
"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," said FPL President and CEO Eric Silagy. "FPL's combination of low bills, outstanding service and clean generation is among the very best in the country, and this important agreement will help us continue delivering superior value for customers. This is an excellent example of what can be achieved through cooperative, constructive partnerships, and I thank Public Counsel and other customer representatives for helping lead the development of this important, innovative compromise, which will benefit our customers and our state in the years ahead."
The agreement, which was also supported by the South Florida Hospital & Healthcare Association and the Florida Retail Federation, resolves FPL's current base rate proceeding and addresses related matters, including natural gas hedging and universal-scale solar investment.
The agreement reflects a reduction in FPL's proposed January 2017 base rate revenue increase of more than 50 percent, from $826 million to $400 million, driven partly by a reduction in the company's originally proposed return on equity midpoint from 11.5 percent to 10.55 percent.
The agreement allows for an ROE range of 9.60 percent to 11.60 percent. FPL's current allowed ROE midpoint is 10.50 percent with a range of 9.50 percent to 11.50 percent. Likewise, FPL's 2018 requested revenue increase would be reduced by more than 20 percent, from $270 million to $211 million.
The agreement also includes the FPL Okeechobee Clean Energy Center, which is expected to begin serving customers in mid-2019, with a $200 million revenue adjustment upon entering service. This is a reduction of $9 million compared with FPL's original proposal.
The FPL Okeechobee Clean Energy Center will use advanced combined-cycle natural gas technology to help meet Florida's growing energy needs. Due to the plant's fuel efficiency, customers will benefit from a decrease in the fuel portion of their bills that will partially offset the base rate increase necessary to cover the capital and operating costs.
FPL will be allowed to adjust base rates to accommodate up to 300 MW of new solar capacity annually during the agreement's four-year term. Each proposed solar project must be determined to be cost-effective – meaning the base rate impact is expected to be offset by fuel and other benefits so that the project produces a net savings for customers over its operating lifetime.
Other components of the approved agreement:
· Encourages a 50 MW pilot program to expand on FPL's battery storage initiatives to enhance operations of existing and/or planned solar facilities, among other potential benefits. Cost recovery would be included in FPL's next base rate proceeding so the program would not impact rates until 2021 at the earliest
· Terminates FPL's natural gas hedging program during the settlement's term – a key condition of the Office of Public Counsel's support. Although FPL continues to support the idea of hedging as a means to protect customers during times of higher fuel price volatility, the company accepts the termination of the program until the end of the settlement term as part of the broader compromise benefitting customers
· Continues FPL's successful asset optimization incentive mechanism with a minimum sharing threshold of $40 million. Created as part of 2012 base rate settlement, FPL's enhanced program saved FPL customers more than $124 million during the 2013-2015 period – $22 million more than would have been saved under the previous program
· Maintains the company's current equity ratio
· Maintains energy conservation credits for large business customers who participate in the Commercial and Industrial Load Control program at current levels
· Reduces depreciation expense by $126 million compared with FPL's adjusted proposal
· Allows FPL to amortize over the settlement's minimum term up to $1 billion of depreciation surplus in addition to the rollover of any unamortized reserve amount from the 2012 Settlement Agreement