PSC rejects FPL rate hike - power company says it stops capital expenditures in FL

01/13/10 Seán Kinane
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Today the Florida Public Service Commission (PSC) rejected most of a rate hike request from Florida Power & Light (FPL).

According to a press release from FPL (see below), in response the power company "will immediately suspend activities on projects representing approximately $10 billion of investment over the next five years" in the state.

The projects include development of two new Turkey Point nuclear reactors (beyond that required for Nuclear Regulatory Commission licencing), updating plants in Riviera Beach and Cape Canaveral, and a proposed natural gas pipeline.

Stay tuned to 88.5 FM for more coverage of this issue.

Here is the text of the entire FPL press release:

Florida Power & Light Co. January 13, 2010

FOR IMMEDIATE RELEASE

Citing deteriorating regulatory environment, FPL halts billions of dollars in capital expenditures in Florida Projects would have created 20,000 new jobs in Florida

JUNO BEACH, Fla. – Citing a negative decision on its rate proposal by the Florida Public Service Commission (PSC) today as further evidence of a deteriorating regulatory and business environment, Florida Power & Light Company said it will immediately suspend activities on projects representing approximately $10 billion of investment over the next five years in Florida’s energy infrastructure.

The projects would have created an estimated 20,000 direct and indirect construction and related jobs over the next five years.

FPL said it will immediately suspend activities on: • Development of two new nuclear reactors at Turkey Point beyond what is required to receive a license from the Nuclear Regulatory Commission; • Modernization of the Riviera Beach and Cape Canaveral plants; • The proposed Florida EnergySecure natural gas pipeline; and, • Numerous discretionary infrastructure projects targeting improvements in efficiency and reliability within FPL’s power generation, transmission and distribution units.

FPL will also assess the cost structure of its ongoing operations and review other capital investments for appropriate reductions. The company expects to make further decisions on all of these matters no later than the end of the second quarter.

Historically, FPL has been one of Florida’s largest sources of capital investment, generating tens of thousands of jobs and hundreds of millions of dollars in tax revenues tied to its annual investments in the state’s electrical infrastructure.

FPL Group Chairman and CEO Lew Hay issued the following statement:

“We understand that there is never a good time to raise base rates. However, our proposal provided a unique opportunity to lower customers’ total bills while simultaneously investing billions of dollars in our state for upgraded and more efficient electrical infrastructure – all of which would have significant benefits for our customers. Needless to say, we are very disappointed for our customers and the state that this opportunity appears lost.

“This decision was about politics, not economics, and unfortunately it comes at a time when our state urgently needs jobs and investment. In addition, the decision will likely increase customer costs and diminish reliability over the long term because the commission failed to recognize the true cost of providing reliable service to customers.

“Historically, Florida has enjoyed a constructive regulatory environment, which has allowed us to invest billions of dollars to benefit FPL customers while having reasonable confidence that our investors would be allowed to earn fair returns.

“Our past investments have provided FPL customers with bills that are 10 percent lower than the national average and the lowest of the state’s 54 utilities, reliability that is 47 percent better than the national average, and a power generation fleet that is among the cleanest and most efficient in the country.

“Florida’s recent cold weather showed us the benefits of $10 billion in investments over the past five years in power generation and infrastructure, allowing us to reliably maintain service even while operating at near-maximum capacity over a period of days, but it also vividly illustrated the need to continue to invest in the electrical infrastructure.

“Unfortunately, today’s decision will simply reinforce investor perceptions that the regulatory climate in Florida continues to deteriorate and is increasingly hostile to investment. Investments have to be made in the expectation of fair regulatory treatment. By the time we ask for rate recovery, the money – in this case billions of dollars – already has been spent and sunk. Absent confidence in fair regulatory treatment, we believe providers of capital will be more reluctant to invest.

“However, the PSC has spoken. Likewise, so have our investors, who have unfortunately seen what we believe is more than $1 billion of value in their FPL Group stock destroyed over the course of the rate proceeding. As a result, we believe that they do not want us to continue investing capital in Florida unless and until the regulatory and business environment improves. Many of those investors are retirees living on fixed incomes right here in Florida.

“Our business is heavily dependent on the confidence of investors in both the quality of the company and the fairness of regulators. As a result of today’s decision, we believe that FPL will see an increased cost to attract capital, which in the end will lead to higher costs for our customers.”

FPL Group: Energy Solutions for the Next Era FPL Group, Inc. (NYSE: FPL) is a leading clean energy company with 2008 revenues of more than $16 billion, approximately 39,000 megawatts of generating capacity, and more than 15,000 employees in 27 states and Canada. Headquartered in Juno Beach, Fla., FPL Group’s principal subsidiaries are NextEra Energy Resources, LLC, the largest generator in North America of renewable energy from the wind and sun, and Florida Power & Light Company, which serves 4.5 million customer accounts in Florida and is one of the largest rate-regulated electric utilities in the country. Through its subsidiaries, FPL Group collectively operates the third largest U.S. nuclear power generation fleet. For more information about FPL Group companies, visit these Web sites: www.FPLGroup.com, www.NextEraEnergyResources.com, www.FPL.com

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