Utility regulator blasts FPL $1.2 billion rate hike requestby Dara Kam | January 13th, 2010
Public Service Commissioner Nathan Skop took a swipe at Florida Power & Light for requesting a $1.2 billion-a-year rate hike before the utility regulators broke for lunch.
“This rate case seems to be more about improving cash flow from operations and discretionary expenditures than substance,” Skop said.
“That’s clearly indicated by the substantial adjustments” PSC staff made to FPL’s request, Skop said. PSC staff suggested the Juno Beach-based utility be granted just $357 million of the $1 billion it asked for this year.
On Monday, the PSC denied any of Progress Energy Florida’s requested $500 million rate hike, going even lower than the staff’s recommendation of about $50 million.
And things aren’t going so well for FPL so far this morning. The panel turned down its request for a second year rate hike of about $300 million and discontinued its ability to make adjustments in the base rate without the PSC’s approval, taking about another $180 million off the table.
The most contentious part of FPL’s request is up for discussion after the panel, headed by consumer-friendly Chairman Nancy Argenziano, returns in about an hour.
That’s its return on equity – how much profit the state’s largest utility should be allowed to earn – and how much of that its customers should pay for.
FPL wants a 12.5 percent ROE, almost a 2 percent jump from what it’s currently earning.
FPL contends it needs the higher profits to be able to borrow more cheaply in the future and to invest in future projects.
“In the midst of our rate proceeding, our ROE was 10.7% (May 2009) and since that time our ability to earn a fair rate of return on equity has continued to deteriorate. Our position is that the Commission should authorize 12.5% as the return on common equity. Granting FPL’s requested return on equity will appropriately take into account overall utility industry risks, as well as FPL’s need to invest $16 billion (investments) to provide service over the next five years. Granting FPL’s common ROE is critical to maintaining FPL’s financial strength and flexibility and will help FPL attract the large amounts of capital that are needed to service its customers,” FPL spokesman Mayco Villafana said in an e-mail this morning.