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From the staff of the Tampa Bay Times

Financial markets issue gloomy warnings if utilities are refused rate hikes



Florida utility regulators opened debate Wednesday on Florida Power & Light's request to raise annual base rates $1.3 billion and, amid gloomy warnings from financial analysts, prepared to focus on the impact on the company if the rate increase is denied.

Fitch Ratings has placed the ratings of FPL Group Inc., FPL Group Capital Inc. and FPL Co. on negative rating watch, a sign to investors that they expect the credit rating of the companies to be downgraded because the PSC decision poses ``a greater possibility of a poor outcome of the pending FP&L rate case.'. Fitch said the credit watch affects approximately $11 billion of securities.'

The PSC has asked its staff to prepare information regarding the company's credit rating, which has been one of the highest in the nation's for utility companies. Commissioner Nathan Skop repeatedly attempted to raise the point that these kinds of warnings, as well as worried predictions from FPL were off-base.

"Irrespective for what the rating agencies choose to least in Florida, with our constructifve reglatory environment,'' the PSC has a history of allowing Florida electric companies to swiftly collect money from consumers to pay for any new power plants and that adds up to a "negligible'' risk for the companies.

But several rating agencies sent out warning signals on Tuesday. "Fear in Florida," read the headline in the Bank of America/Merrill Lynch financial analysts report. The PSC decision Monday to reject the Progress request for a $500 million annual increase and hold base rates flat ``gives some clarity on what could happen -- mostly to the negative,'' wrote energy analyst Steve Fleishman.

The Public Service Commission set the tone for the discussion on Monday when it voted down a rate increase for one of the state's largest utility companies, Progress Energy. Consumer groups and industry analysts expect the FPL case could have similar results. Consumer groups say the recent realignment of the commission and the Progress decision ``bodes well'' for FPL's 4.5 million customers.

Commissioner Nathan Skop started the hearings with a series of questions to staff which he said were intended to inform listeners and viewers of that ”despite representations” from the company and industry watchers, the request to increase the base rate would not affect the company’s ability to get customers to reimburse it for the cost of its solar power plants, its new generating units in Rivera Beach and Cape Canaveral and its plants to build new nuclear generating units at Turkey points. Read more here.

[Last modified: Thursday, September 9, 2010 1:14pm]


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