PSC questions FPL's choice of words after rate case

TALLAHASSEE — Did Florida Power & Light mislead state regulators when it announced Jan. 13 that it would be forced to suspend projects because it didn't win a 30 percent rate increase?

That's what the Public Service Commission wants to know.

The day after the PSC's rate decision, FPL said in a press release that it would suspend projects to retire old plants and build new ones in Riviera Beach and Cape Canaveral. But the PSC now says that doesn't mesh with what it approved when it agreed to give the company $44.9 million to complete the projects.

"Please explain or describe the exact meaning of the Company's statement," PSC analyst Lisa Bennett wrote to the company in reference to the press release.

In its response to the commission late Tuesday, FPL's attorney said that even though it said it would "suspend'' the projects, they still might be completed on schedule.

The commission rejected FPL's request to raise rates by $1.3 billion and approved, instead, a $75 million-a-year increase in the base rate — about 75 cents for every 1,000 kilowatt hours.

FPL testified that it was committed to retiring the old plants by 2014 and build new ones, and that it needed the $44.9 million to recover its costs of the old plants before they are demolished. If the company doesn't meet those dates, the PSC could reduce its base rates.

"It is highly possible that the commission would feel it necessary to recalculate the rates," said Earl Poucher, an analyst with the Office of Public Counsel, which represented the public in the rate case. "It all depends on whether these are the right dates or the wrong dates."

Just hours before the PSC voted to reject FPL's request for a $1.3 billion rate increase, FPL Chief Executive Officer Armando Olivera blasted the ruling, saying that "politics trumped economics'' and immediately warned that the company would suspend several projects.

The next day, the company issued a press release saying that the "deteriorating regulatory and business environment'' had forced the company to "suspend'' the $2 billion modernization projects at Riviera Beach and Cape Canaveral and $8 billion in other projects.

The head of FPL's parent company, Lew Hay, told Wall Street analysts Tuesday that the projects are not dead.

"I want to emphasize the word suspend, as opposed to the word cancel," he said in a conference call announcing FPL Group's fourth quarter earnings.

"These are significant projects that we hope to build and operate, but the decision to suspend them was made in response to the negative impact of the rate decision on FPL's creditworthiness and the ability to attract capital at attractive rates."

Hay told Wall Street analysts that while he was disappointed in the PSC's rate decision, FPL made 23 percent more in profits for the fourth quarter than it did in 2008, while parent company FPL Group Inc.'s profit fell by 14 percent during the same reporting period.

"The last rate case was 25 years ago," he said. "I think it's safe to say we will not go another 25 years without a rate case, but we have not decided when we will do so again."

Mary Ellen Klas can be reached at meklas@MiamiHerald.com.

PSC questions FPL's choice of words after rate case 01/26/10 [Last modified: Tuesday, January 26, 2010 7:47pm]

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