2012 Correspondence - FPL •
PPL
March 16, 2012
Susan J Wadsworth
City Clerk
Edgewater
P.O.Box 100
Edgewater, FL 32132 -0100
RE: Utility Tax Exemption Questionnaire
Dear Valued Customer:
In an effort to maintain the accuracy of our records and better serve our customers, we need to
update our files for any applicable utility tax exemption(s) in your city.
Enclosed is the Utility Tax Exemption Questionnaire with your County /Municipality name and
Franchise number. If you are not the correct contact for completing this form, would you please
forward to the appropriate party. Your prompt attention in returning the completed questionnaire
to us as soon as possible will be greatly appreciated. Please return via facsimile to 561 -691 -7731 or
mail to the contact listed below in the self - addressed enclosed envelope.
Mr. Andy Hooper
Florida Power & Light
700 Universe Boulevard, PSX /JB
June Beach, FL 33408
Thank you in advance for your assistance. If you should have any questions please contact me at
(561) 691 -7436 between 7:00 AM to 3:30 PM, Tuesday through Friday.
Sincerely,
Andy Hooper
Lead Tax Exemption Technician
Enclosures
Florida Power & Light Company
700 Universe Boulevard, Juno Beach, FL 33408
Utility Tax Exemption Questionnaire
County /Municipality.• Edgewater Franchise #: 0420
A. CHURCHES /RELIGIOUS ORGANIZATIONS EXEMPTION
• If a Church /Religious Organization has a current Consumers Exemption Certificate on file with FPL to
exempt Florida sales tax, should we also exempt them from Utility tax?
Yes Q No ❑
If yes, and the Sales Tax Exemption Certificate expires and the customer has not sent an updated one to FPL,
do you want th customer billed utility tax until one is received?
Yes i No ❑
• Do you have special guidelines for exempting multiple accounts for the same religious customer, for example,
house of worship, outdoor light, parsonage, school, hall, etc.?
Special Guidelines — Please List Below
B. MANUFACTURER'S EXEMPTION
• Do you have an ordinance that exempts from utility tax the total amount, or a portion, of electricity when
purchased by an industrial customer, which uses the electricity directly in industrial manufacturing,
processing, compounding, or a production process of items of personal property at a fixed location?
Yes ❑ No
If yes, what are the Standard Industry Codes (SIC) of the industries that qualify for the exemption?
C. REFUND PERIOD
• Do you allow for refund of utility tax previously paid by the customer?
Yes ❑ No
If yes, for what period of time:
COUNTY /MUNICIPALIITY CONTACT PERSON:
Print Name: J 0 Title: {— /NAM C 1 f e C
n : $4 a o
Ph e-10 I
Phone: ( ) `f �1. dH o Email: yv\c � < M C k �� o-C e� e a -er , p� C
Signature: — tr . 7/ 1 \ Date: 3 'x0'1
Please return completed and signed form to: FPL, Tax Exemption Department
FAX: (561) 691 -7731
CITY OF EDGEWATER
FPL, RECEIVED
P1Art 2 1 2012
March 19, 2012
CE
Mayor Michael Thomas (,f T YL - Fti
PO Box 100
Edgewater, FL 32132 -0100
Dear Mayor Thomas,
I am writing to make you aware that today we filed the required petition, testimony and data supporting
our request for a January 2013 change in base rates.
With the proposed base rate increase and the latest estimates for fuel and other components of electric
service, FPL's typical 1,000 -kWh residential bill is projected to increase by about $2.48 a month, or about
8 cents per day compared with today's bill. This includes the proposed base rate increase of $6.97 a
month, or about 23 cents a day, offset in part by an estimated $4.49 a month net decrease in other
components of a typical 1,000 -kWh residential customer bill in 2013.
Most small businesses, which comprise more than 80 percent of all commercial customers in FPL's
territory, would see little change in their bills in 2013. In fact, many would actually see a net decrease on
their bills based on currently projected reductions in the fuel charge and other bill components, more
than offsetting the base rate increase.
The increase would not take effect until 2013, and we expect that, even with the change, our customer
bills will still be the lowest in the state and well below the national average.
In fact, from 2006 to 2012, FPL's 1,000 -kWh residential customer bill has decreased 13 percent. FPL's
business customer bills have decreased, on average, 14 percent during the same time period.
Also today we launched a new, online calculator at www.FPL.com /answers so that residential customers
can see the impact on their bills of the company's requested rate adjustment. Business customers also
will find updated information on this site.
Key elements underlying the company's request include:
• The need to address the impact of the accelerated amortization of non -cash surplus depreciation,
which was part of a 2010 base rate case settlement and which was a temporary solution to avoid a
base rate increase
• Cost recovery for the new Cape Canaveral Next Generation Clean Energy Center, which will use 33
percent less fuel per megawatt -hour of power generated
• The impact of inflation on the cost of many materials and products needed to provide affordable,
reliable power
• The anticipated addition of nearly 100,000 new customers between the end of 2010 and the end of
2013
• A proposed adjustment to an 11.25 percent midpoint return on equity, which is within the range of
currently allowed ROEs for other investor -owned utilities in the state.
Florida Power & Light Company
425 N. Williamson Blvd., Daytona Beach, FL 32114
Page 2
We know there is never a good time for a rate increase, and we are particularly mindful that the
economy remains uncertain. We've worked hard to minimize the required increase, and we're
committed to working equally hard to make sure our customers continue to have the lowest electric
bills in the state, reliability that is among the best in the country and top -notch customer service. Clean,
low -cost, high - quality electric service is a competitive advantage for our customers and our state.
Please click here http: / /www.fpl.com /customer /efficiency /common /pdf /newsrelease2.pdf
to read the news release we issued today on this subject. You have my commitment that we will
continue to communicate with you throughout the rate - making process. Our website,
www.FPL.com /answers also will provide you with updated information. Finally, you are welcome to
contact me directly if you have questions or concerns.
Thank you,
//
i
Larry Volenec P.E.
Area Manager
Florida Power & Light
larry.volenec @fpl.com
Florida Power & Light Company
425 N. Williamson Blvd., Daytona Beach, FL 32114
FPL.
Florida Power & Light Co.
Media Line: 305 - 552 -3888
March 19, 2012
FOR IMMEDIATE RELEASE
Florida Power & Light Company files request for base rate increase
• Total bill impact for 1, 000 -kWh residential customer expected to be about 8 cents a day
• Company launches online tool so residential customers can calculate their personal bill impact
• Despite increase, typical FPL customer bill expected to remain lowest in state and lower than
the national average
JUNO BEACH, Fla. — Florida Power & Light Company today filed its formal request for a base rate
increase with the Florida Public Service Commission (PSC). The requested increase would not take
effect until Jan. 1, 2013.
Today's filing was consistent with the company's notice to the PSC in January that an adjustment
would be necessary because the company's existing rate agreement, which effectively froze base
rates for three years, expires at the end of 2012.
FPL expects that, even with the change, its customer bills will still be the lowest in the state and well
below the national average.
The company is requesting a base rate increase of $6.97 a month, or about 23 cents a day, on the
base portion of a typical 1,000 -kWh residential customer bill offset in part by an estimated $4.49 a
month net decrease in other components of a typical bill, including lower fuel usage, lower fuel
prices and other adjustments.
As a result, the typical residential customer bill would increase about $2.48 a month, or about 8
cents a day — a 2.6 percent increase.
The adjustment is needed to pay for increases in the cost of doing business and to begin paying for
a new, high- efficiency natural gas power plant after it enters service in June 2013. The plant will use
considerably less fuel to generate electricity, which in turn helps to keep customer bills low over the
long term and reduces the impact of the base rate request.
"We've worked hard to minimize the required increase, and we're committed to working equally
hard to make sure our customers continue to have the lowest electric bills in the state, excellent
reliability and top -notch customer service. In today's competitive economy, clean, low -cost, high -
quality electric service is an advantage for our customers and our state," FPL President Eric Silagy
said.
The majority of FPL residential customers use less than 1,000 kilowatt -hours of electricity a month,
although usage varies from household to household.
To enable residential customers to see the specific impact on their bills based on their individual
use of electricity, FPL launched a new, online calculator at www.FPL.com /answers. Residential
customers can input their individual kilowatt -hour usage to see the estimated effect on their bills in
2013.
In addition to the bill calculator, customers can find more details about the need for the increase,
what FPL has done to increase efficiencies and reduce costs, the latest on construction of the
company's new high- efficiency natural gas power plant and other information throughout the rate -
setting process at www.FPL.com /answers.
FPL's total revenue request is $690.4 million. In addition to investing in new, highly efficient power
plants that lower customers' fuel costs, Silagy emphasized that the company is committed to
continuing to operate efficiently. Even while the costs of essential products and services have risen
dramatically, FPL is in the best 10 percent of U.S. utilities for operating efficiently, based on low
operating and maintenance (O &M) costs per kilowatt -hour of retail sales.
Information for Residential Customers
• With the proposed base rate increase and the latest estimates for fuel and other
components of electric service, FPL's typical 1,000 -kWh residential customer bill is projected
to increase about 2.6 percent in 2013, based on the following adjustments:
o Proposed increase of $6.97 a month, or about 23 cents a day, on the base portion of
a 1,000 -kWh bill offset in part by an estimated $4.49 a month net decrease in other
components of a typical 1,000 -kWh residential customer bill.
o Net increase of $2.48 a month, or about 8 cents a day, on a typical 1,000 -kWh
residential customer bill in 2013.
• Even after the increase, FPL's typical residential customer bill is expected to remain the
lowest of the state's 55 electric utilities and well below the national average.
o FPL's typical residential customer bill is 13 percent lower today than it was in 2006.
o In 2013, FPL's typical residential customer bill will still be about 10 percent lower
than it was in 2006.
Information for Business Customers
• FPL's business customer bills have decreased, on average, about 14 percent from 2006 to
2012. The proposed base rate adjustment would vary widely among commercial and
industrial electric customers depending on rate class and usage. The net change in 2013
over 2012 for most business customers' total bills is expected to range from a decrease of 3
percent to an increase of 4 percent.
• Most small businesses, which comprise more than 80 percent of all commercial customers
in FPL's territory, would see little change in their bills in 2013. In fact, many would actually
see a net decrease on their bills based on currently projected reductions in the fuel charge
and other bill components more than offsetting the base rate increase.
• Large commercial and industrial customers with more complex rate structures may contact
their FPL account managers for details about their 2013 bills.
Florida Power & Light Company
Florida Power & Light Company is the largest electric utility in Florida and one of the largest rate -
regulated utilities in the United States. FPL serves approximately 4.6 million customer accounts and
is a leading Florida employer with approximately 10,000 employees. The company consistently
outperforms national averages for service reliability while its typical residential customer bills, based
on data available in December 2011, are about 25 percent below the national average. A clean
energy leader, FPL has one of the lowest emissions profiles and one of the leading energy
efficiency programs among utilities nationwide. FPL is a subsidiary of Juno Beach, Fla. -based
NextEra Energy, Inc. (NYSE: NEE). For more information, visit www.FPL.com.
Cautionary Statements And Risk Factors That May Affect Future Results
This press release contains "forward- looking statements" within the meaning of the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Forward- looking statements are not statements of
historical facts, but instead represent the current expectations of NextEra Energy, Inc. (NextEra Energy) and
Florida Power & Light Company (FPL) regarding future operating results and other future events, many of
which, by their nature, are inherently uncertain and outside of NextEra Energy's and FPL's control. Forward -
looking statements in this press release include, among others, statements concerning the effects of FPL's
rate request. In some cases, you can identify the forward- looking statements by words or phrases such as
"will," "will likely result," "expect," "anticipate," "believe," "intend," "plan," "seek," "aim," "potential," "projection,"
"forecast," "predict," "goals," "target," "outlook," "should," "would" or similar words or expressions. You should
not place undue reliance on these forward- looking statements, which are not a guarantee of future
performance. The future results of NextEra Energy and FPL are subject to risks and uncertainties that could
cause their actual results to differ materially from those expressed or implied in the forward- looking
statements. These risks and uncertainties include, but are not limited to, the following: effects of extensive
regulation of NextEra Energy's and FPL's business operations; inability of NextEra Energy and FPL to
recover in a timely manner any significant amount of costs, a return on certain assets or an appropriate return
on capital through base rates, cost recovery clauses, other regulatory mechanisms or otherwise; impact of
political, regulatory and economic factors on regulatory decisions important to NextEra Energy and FPL; risks
of disallowance of cost recovery by FPL based on a finding of imprudent use of derivative instruments; effect
of reduction or elimination of existing government support policies on demand for generation from renewable
energy projects of NextEra Energy Resources, LLC (NEER); impact of new or revised laws, regulations or
interpretations or other regulatory initiatives on NextEra Energy and FPL; effect on NextEra Energy and FPL
of potential regulatory action to broaden the scope of regulation of OTC financial derivatives and to apply
such regulation to NextEra Energy and FPL; capital expenditures, increased cost of operations and exposure
to liabilities attributable to environmental laws and regulations applicable to NextEra Energy and FPL; effects
on NextEra Energy and FPL of federal or state laws or regulations mandating new or additional limits on the
production of greenhouse gas emissions; exposure of NextEra Energy and FPL to significant and increasing
compliance costs and substantial monetary penalties and other sanctions as a result of extensive federal
regulation of their operations; effect on NextEra Energy and FPL of changes in tax laws and in judgments and
estimates used to determine tax - related asset and liability amounts; impact on NextEra Energy and FPL of
adverse results of litigation; effect on NextEra Energy and FPL of failure to proceed with projects under
development or inability to complete the construction of (or capital improvements to) electric generation,
transmission and distribution facilities, gas infrastructure facilities or other facilities on schedule or within
budget; impact on development and operating activities of NextEra Energy and FPL resulting from risks
related to project siting, financing, construction, permitting, governmental approvals and the negotiation of
project development agreements; risks involved in the operation and maintenance of electric generation,
transmission and distribution facilities, gas infrastructure facilities and other facilities; effect on NextEra
Energy and FPL of a lack of growth or slower growth in the number of customers or in customer usage;
impact on NextEra Energy and FPL of severe weather and other weather conditions; risks associated with
threats of terrorism and catastrophic events that could result from terrorism, cyber attacks or other attempts to
disrupt NextEra Energy's and FPL's business or the businesses of third parties; risk of lack of availability of
adequate insurance coverage for protection of NextEra Energy and FPL against significant losses; risk to
NEER of increased operating costs resulting from unfavorable supply costs necessary to provide NEER's full
energy and capacity requirement services; inability or failure by NEER to hedge effectively its assets or
positions against changes in commodity prices, volumes, interest rates, counterparty credit risk or other risk
measures; potential volatility of NextEra Energy's results of operations caused by sales of power on the spot
market or on a short-term contractual basis; effect of reductions in the liquidity of energy markets on NextEra
Energy's ability to manage operational risks; effectiveness of NextEra Energy's and FPL's hedging and
trading procedures and associated risk management tools to protect against significant losses; impact of
unavailability or disruption of power transmission or commodity transportation facilities on sale and delivery of
power or natural gas by FPL and NEER; exposure of NextEra Energy and FPL to credit and performance risk
from customers, hedging counterparties and vendors; risks to NextEra Energy and FPL of failure of
counterparties to perform under derivative contracts or of requirement for NextEra Energy and FPL to post
margin cash collateral under derivative contracts; failure or breach of NextEra Energy's and FPL's information
technology systems; risks to NextEra Energy and FPL's retail businesses of compromise of sensitive
customer data; risks to NextEra Energy and FPL of volatility in the market values of derivative instruments
and limited liquidity in OTC markets; impact of negative publicity; inability of NextEra Energy and FPL to
maintain, negotiate or renegotiate acceptable franchise agreements with municipalities and counties in
Florida; increasing costs of health care plans; lack of a qualified workforce or the loss or retirement of key
employees; occurrence of work strikes or stoppages and increasing personnel costs; NextEra Energy's ability
to successfully identify, complete and integrate acquisitions; environmental, health and financial risks
associated with NextEra Energy's and FPL's nuclear generation facilities; liability of NextEra Energy and FPL
for significant retrospective assessments and /or retrospective insurance premiums in the event of an incident
at certain nuclear generation facilities; increased operating and capital expenditures at nuclear generation
facilities of NextEra Energy or FPL resulting from orders or new regulations of the Nuclear Regulatory
Commission; inability to operate any of NEER's or FPL's nuclear generation units through the end of their
respective operating licenses; liability of NextEra Energy and FPL for increased nuclear licensing or
compliance costs resulting from hazards posed to their nuclear generation facilities; risks associated with
outages of NextEra Energy's and FPL's nuclear units; effect of disruptions, uncertainty or volatility in the credit
and capital markets on NextEra Energy's and FPL's ability to fund their liquidity and capital needs and meet
their growth objectives; inability of NextEra Energy, FPL and NextEra Energy Capital Holdings, Inc. to
maintain their current credit ratings; risk of impairment of NextEra Energy's and FPL's liquidity from inability of
creditors to fund their credit commitments or to maintain their current credit ratings; poor market performance
and other economic factors that could affect NextEra Energy's and FPL's defined benefit pension plan's
funded status; poor market performance and other risks to the asset values of NextEra Energy's and FPL's
nuclear decommissioning funds; changes in market value and other risks to certain of NextEra Energy's
investments; effect of inability of NextEra Energy subsidiaries to upstream dividends or repay funds to
NextEra Energy or of NextEra Energy's performance under guarantees of subsidiary obligations on NextEra
Energy's ability to meet its financial obligations and to pay dividends on its common stock; and effect of
disruptions, uncertainty or volatility in the credit and capital markets of the market price of NextEra Energy's
common stock. NextEra Energy and FPL discuss these and other risks and uncertainties in their annual
report on Form 10 -K for the year ended December 31, 2011 and other SEC filings, and this press release
should be read in conjunction with such SEC filings made through the date of this press release. The forward -
looking statements made in this press release are made only as of the date of this press release and NextEra
Energy and FPL undertake no obligation to update any forward- looking statements.
CITY OF FDCFWATFF
RECEIVED
FPL WI 212 2
Dear Valued CITY CLERK
I'm writing to make you aware that today FPL filed with the Florida Public Service Commission
the required petition, testimony and data supporting our request for a January 2013 change in
base rates.
With the proposed base rate increase and the latest estimates for fuel and other components of
electric service, FPL's typical 1,000 -kWh residential bill is projected to increase by about $2.48
a month, or about 8 cents per day compared to today's bill. This includes the proposed base
rate increase of $6.97 a month, or about 23 cents a day, offset in part by an estimated $4.49 a
month net decrease in other components of a typical 1,000 -kWh residential customer bill in
2013.
For business customers, due to fuel efficiency savings, current projections of fuel prices, and
other expected changes to base rates and clauses in 2013, the net impact on total bills is
estimated to range from a decrease of 3 percent to an increase of 4 percent.
The increase would not take effect until January 2013, and we expect that, even with
the change, our customer bills will still be the lowest in the state and well below the
national average.
In fact, from 2006 to 2012, FPL's total 1,000 -kWh residential customer bill has
decreased 13 percent. FPL's business customer bills have decreased, on average, 14
percent during the same time period.
Also today we launched a new, online calculator at www.FPL.com /answers so that
residential customers can see the impact on their bills of the company's requested rate
adjustment. Business customers also will find updated information on this site.
Key elements underlying the company's request include:
• The need to address the impact of the accelerated amortization of non -cash surplus
depreciation, which was part of a 2010 base rate case settlement
• Cost recovery for the new Cape Canaveral Next Generation Clean Energy Center,
which will use 33 percent less fuel per megawatt -hour of power generated and far
fewer emissions than the former plant
• The impact of inflation on the cost of many materials and products needed to provide
affordable, reliable power
• The anticipated addition of nearly 100,000 new customers between the end of 2010
and the end of 2013
• A proposed adjustment to an 11.25 percent midpoint return on equity (ROE), which
falls within the range of currently allowed ROEs for other investor -owned utilities in
the state.
Florida Power & Light Company
700 Universe Boulevard, Juno Beach, FL 33408
We know there is never a good time for a rate increase, and we are particularly mindful
that the economy remains uncertain. We've worked hard to minimize the required
increase, and we're committed to working equally hard to make sure our customers
continue to have the lowest electric bills in the state, reliability that is among the best in
the country and top -notch customer service. Clean, low -cost, high - quality electric
service is a competitive advantage for our customers and our state.
As a community leader and FPL customer, your local stewardship and partnership with
us mean a great deal to us. Please feel free to contact me if you would like to discuss
FPL's base rate proposal further. A copy of FPL's Petition for Rate Increase is included
with this letter, in compliance with Rule 25- 22.0406(2), Florida Administrative Code.
Sincerely,
e ---1
Pamela Rauch
Vice President, Development and External Affairs
CITY OF EDGEWATER
,474„,7--,,7 RECEIVED
rf , MAR 2 1 2012
Cry CLERK R. Wade Litchfield
Vice President and General Counsel
March 19, 2012
-VIA HAND DELIVERY –
Ms. Ann Cole, Director
Division of the Commission Clerk and Administrative Services
Florida Public Service Commission
2540 Shumard Oak Blvd
Tallahassee, FL 32399 -0850
Re: Docket No. 120015 -EI
Dear Ms. Cole:
Enclosed for filing on behalf of Florida Power & Light Company ( "FPL ") in the above -
referenced docket is an original and 21 copies of the following:
1. FPL's Petition for Rate Increase;
2. Direct Testimony and Exhibits of FPL witnesses Avera, Barrett, Deaton, Dewhurst,
Ender, Hardy, Kennedy, Miranda, Morley, Ousdahl, Reed, Santos, Silagy, Slattery,
and Stall; and
3. Minimum Filing Requirements ( "MFRs ") and Schedules.
A Request for Confidential Classification of certain information contained in MFRs D -2
and F -4 is being filed under separate cover. Also enclosed is a CD containing an electronic file
of FPL's Petition. Please contact me should you or your Staff have any questions regarding this
filing.
Sincerely,
C —Lt„,,A---,,,,--------- 114_,.____=__
Wade Litchfield
Vice President and General Counsel
Florida Power & Light Company
RWL:ec
Enclosures
cc: Parties of Record (w /encl.)
Honda Power & Light Company
700 Universe Boulevard, Juno Beach, FL 33408 Florida Authorized House Counsel /Admitted NY, LA
BEFORE THE
FLORIDA PUBLIC SERVICE COMMISSION
In re: Petition for rate increase by Florida Docket No. 120015 -EI
Power & Light Company Filed: March 19, 2012
PETITION
Florida Power & Light Company ( "FPL" or "the Company "), pursuant to the provisions
of Chapter 366, Florida Statutes (2012), and Rules 25- 6.0425 and 25- 6.043, Florida
Administrative Code, respectfully petitions the Florida Public Service Commission (the
"Commission ") for approval of a permanent increase in rates and charges sufficient to generate
additional total annual revenues of $516.5 million to be effective January 2, 2013 (the first
billing cycle day of January 2013), and for approval of a base rate step adjustment of $173.9
million for the new, highly efficient generation facility currently under construction at Cape
Canaveral (the "Canaveral Modernization Project "), concurrent with its commercial in- service
date (currently scheduled to be June 1, 2013).
FPL provides its residential customers with typical (1,000 kWh) bills that are the lowest
of Florida's 55 electric utilities and 25 percent lower than the national average, while at the same
time delivering excellent service and reliability. To maintain the level of service and reliability
that FPL's customers expect and deserve, FPL must continue investing in system reliability, fuel
efficiency and cleaner energy. The requested increase will support these investments that benefit
customers, and will provide the Company a reasonable opportunity to earn a fair rate of return,
including an 11.25 percent rate of return on the Company's common equity capital ( "return on
equity" or "ROE "), and a 0.25 percent ROE performance adder, which FPL proposes would
remain in effect only if it continues to maintain the lowest typical residential customer bill in the
state. FPL expects that the total proposed rate adjustment in this proceeding will increase the
Docket No. 120015 -EI
Florida Power & Light Company
Petition
base portion of the bill for a typical residential customer by $6.97, or about 23 cents per day.
Due to fuel efficiency savings, lower fuel costs and other reductions that will be reflected on
customer bills, the total bill for a typical residential customer is projected to increase by a much
smaller amount: $2.48 per month, or about 8 cents per day. This means that FPL's typical
residential bill will remain the lowest in the state of Florida as compared to the current rates of
the other utilities and would still be well below the national average. In fact, even with the
requested increase, FPL's typical residential bill in 2013 is projected to be 10 percent below the
level in 2006, which was prior to the recent economic downturn. In support of this Petition, FPL
states as follows:
Introduction
1. Any pleading, motion, notice, order or other document required to be served upon
FPL or filed by any party to this proceeding should be served upon the following individuals:
R. Wade Litchfield Kenneth A. Hoffman
Vice President and General Counsel Vice President Regulatory Affairs
wade.litchfield @fpl.com ken.hoffman@fpl.com
John T. Butler Florida Power & Light Company
Assistant General Counsel- Regulatory 215 South Monroe Street
john.butler @fpl.com Suite 810
Florida Power & Light Company Tallahassee, Florida 32301
700 Universe Boulevard (850) 521 -3900
Juno Beach, Florida 33408 -0420 (850) 521 -3939 (fax)
(561) 691 -7101
(561) 691 -7135 (fax)
2. FPL is a corporation with its headquarters located at 700 Universe Boulevard,
Juno Beach, Florida, 33408 -0420. FPL is an investor -owned utility operating under the
jurisdiction of this Commission pursuant to the provisions of Chapter 366, Florida Statutes
(2012). FPL is a wholly -owned subsidiary of NextEra Energy, Inc., a registered holding
2
Docket No. 120015 -EI
Florida Power & Light Company
Petition
company under the federal Public Utility Holding Company Act and related regulations. FPL
currently provides generation, transmission and distribution service to more than 4.5 million
retail customers across the state of Florida.
3. For years FPL has consistently ranked among the very best in the electric utility
industry, and it continues to do so. FPL is a leader in key categories such as reliability, low
emissions and conservation. FPL delivers clean and highly reliable electric service to its
customers, while maintaining the lowest typical residential bill in the state. This is the result of
among other things, FPL's long -teen strategy of sustained investment in modern fuel- efficient
technologies and its commitment to manage operating costs efficiently. FPL customers receive
exceptional value as a result of FPL's long -term planning and the effective implementation of
those plans by FPL management.
4. FPL's low bills and high reliability help make Florida a more affordable and
desirable place to live and run a business. This is especially important as the state emerges from
a challenging economic climate. Even with the requested base rate increase, FPL expects that its
typical residential bill will remain the lowest in the state, based on currently available
comparisons of the state's 55 utilities, and will still be well below the national average.
5. FPL provides extremely affordable service. The Company also recognizes that no
increase in price is ever welcomed. It is important to note that while the costs of other everyday
goods and services have been rising considerably, FPL's typical residential bill actually has gone
down. The cumulative increase in inflation from 2006 to 2012 was 14.2 percent as measured by
the Consumer Price Index ( "CPI "). Some specific goods and services have experienced even
more substantial price increases. For instance, over the same time period, the prices of groceries
3
Docket No. 120015 -EI
Florida Power & Light Company
Petition
and healthcare have risen by about 20 percent and 24 percent, respectively, while the price of a
gallon of gas has gone up by more than 41 percent. At the same time, FPL's total typical
residential bill has gone down by 13 percent. And while the impact of the rate increase on the
base bill would be an increase of 16 percent over 2012, the total residential bill would increase
by a net of only 3 percent due to fuel savings, lower fuel costs and other reductions — resulting in
a total bill that will be 10 percent lower than it was in 2006.
6. While FPL's focus on efficiency and productivity has lessened the impact of
inflation, the costs of many materials and products that the Company must purchase in order to
provide affordable, reliable power have risen significantly over the past few years. These cost
pressures contribute to our need for rate relief. Nevertheless, because of FPL's strong record and
continued commitment to cost control and efficiency, the Company expects to maintain its
position among the top utilities nationally in operating and maintenance ( "O &M ") expense
performance. The requested rate relief will allow FPL to continue to provide exceptional value
at affordable prices.
A. FPL's Cost Control Activities and Strong Fossil Fleet Performance Have Mitigated
the Need for a Base Rate Increase
7. FPL has set a high standard for itself in productivity, efficiency, output and
reliability. FPL's ability to maximize output and minimize costs has ranked highest among all
Florida electric utilities over the past ten years. This exceptional performance has mitigated
FPL's need for base rate increases and has resulted in an outstanding value proposition for
customers over a sustained period of time. This value is reflected in a combination of low rates,
superior reliability and customer service, and a significantly improved emissions profile.
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8. Productive Efficiency. FPL ranks highest in productive efficiency compared to
all Florida utilities and to comparable large utilities nationwide since 2001. FPL management
and employees work diligently to control expenses despite escalating costs, continued customer
growth, and increased reliability requirements. One of the best indicators of the Company's cost
control achievements is FPL's total non -fuel O &M expense performance, which covers all
primary operating functions — generation, transmission, distribution and customer service — and
also includes all administrative and general functions. Had FPL's performance under this metric
been average, the Company's O &M costs for 2010 alone would have been $1.6 billion higher
than actual costs. This means the typical base bill in 2010 would have been higher by about $16
— about 37 percent over the current level.
9. Operational Efficiency. FPL's success in controlling O &M expense has been
achieved while maintaining the Company's exceptional level of fleet performance, system
reliability and customer service. In eight of the last ten years, FPL's fossil fleet performance has
ranked top - decile or best in class among comparable companies in terms of availability and
forced outages. In that decade, FPL's fossil fleet averaged more than a 92 percent equivalent
availability factor and an approximate 2 percent equivalent forced outage rate. The addition of
highly efficient generating units and improvements in the operating characteristics of FPL's
existing generating fleet have reduced FPL's system average heat rate by 19 percent over the ten
years from 2001 through 2011. As a result, the Company has been able to cut fuel costs by a
cumulative $5.5 billion over that same period, and every dollar of those savings has been passed
on to customers through the fuel adjustment factors on their bills.
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10. Likewise, FPL's investments in transmission and distribution system
infrastructure have contributed to a reduction in the duration and frequency of outages at the
distribution level. FPL's Distribution 2006 -2010 System Average Interruption Duration Index
( "SAIDI ") perfoiniance ranks in the first quartile in a reliability benchmarking study that was
recently completed by Davies Consulting Inc. and included 31 utilities in approximately 30
states, each of which serves between 300,000 and 5 million customers. FPL's average
Transmission SAIDI was already the best among Florida investor -owned utilities for 2006 -
2010, yet FPL was able to achieve a 21 percent improvement over that average in 2011. These
impressive reliability results have been achieved despite the handicaps of rapid vegetation
growth and the highest incidence of lightning strikes in the nation.
11. FPL is equally proud of its customer service performance. The Company has
received the PA Consulting Group's ServiceOne Award, an award for exceptional customer
service, for an unprecedented eight consecutive years. FPL is the only utility in the nation to
have earned that honor.
12. The high availability and reliability of FPL's fossil fleet have helped FPL avoid or
defer the need to add capacity to the system. These accomplishments are a product of a strong
commitment to excellence and efficient operations, which is carried forward by a quality- driven
work force.
13. Reduced emissions, too, benefit FPL customers and all Floridians not only today, but
for years to come. FPL has one of the lowest emissions profiles among major U.S. utilities in
terms of carbon dioxide, sulfur dioxide and nitrogen oxides. Maintaining low emissions enables
FPL to pass environmental compliance costs savings along to its customers. FPL has achieved
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this exceptional fleet performance through the outstanding performance of its employees and the
addition of new, highly efficient generating technology.
14. These achievements do not occur by accident. They are the product of a coherent
long -range management strategy, a positive work environment, appropriately structured
compensation, and a team of talented and dedicated employees. These factors make possible the
exceptional value proposition the Company offers to its customers, measured by low bills,
service reliability, customer service, cost containment, financial efficiency, productivity, safety,
and environmental stewardship.
B. FPL Must Maintain the Financial Strength Necessary To Invest in the Future
15. FPL has a long history of helping to power Florida through both boom times and
economic challenges, building and adapting an electrical infrastructure that grows in concert
with the state's needs. The current outlook for Florida, as forecasted by independent economic
fines, indicates that the state is emerging from the last few years of a sluggish economy, and is
projected to experience positive economic growth. As the electric service provider for close to
half of Florida's residents, FPL shoulders the responsibility to plan and invest on a long term
basis to ensure that the Company will cost - effectively meet customers' needs not just this year or
next, but many years into the future. By the same token, because FPL serves commercial and
industrial customers, it must have the ability to continue to deliver the type of value that makes
Florida an attractive and competitive place to do business. FPL has done so in the past, and is
positioning itself to continue doing so going forward.
16. Notwithstanding rising costs, FPL must plan ahead and make sound investments
in smarter, cleaner and increasingly efficient infrastructure to ensure it can continue to satisfy
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customers' expectations for reliable, affordable, clean energy now and in the future. From 2011
through 2013, FPL will have invested approximately $9 billion in infrastructure, or an average of
approximately $3 billion annually. FPL continues to be the single largest investor in the state of
Florida year after year, annually reinvesting in Florida infrastructure at levels well above the
Company's net income. To sustain this level of investment and to do so cost effectively, it is
crucial that FPL recover through base rates its prudently incurred costs, including the appropriate
cost of equity capital, or ROE.
17. In return for the investment FPL makes to provide customers with reliable, clean
and affordable electric service, shareholders must be provided with the opportunity to earn a
reasonable and adequate return on their investment. The Supreme Court of the United States has
determined that a reasonable and adequate return on investment is one which is commensurate
with returns that would be earned on investments with corresponding risks and "should be
sufficient to assure confidence in the financial integrity of the enterprise, so as to maintain and
attract capital." Federal Power Comm'n v. Hope Natural Gas Co., 320 U.S. 591, 603 (1944).
Absent rate relief, the Company projects that it would earn a substandard ROE of only 7.7
percent in 2013. This ROE is well below the level needed to "assure confidence in [ FPL's]
financial integrity ... so as to maintain and attract capital" and thus fails the test prescribed in
Hope. As Florida's largest private investor, it is essential that FPL be given the opportunity to
compete effectively for capital.
18. For these and other reasons detailed in the testimony and exhibits of FPL's
witnesses, FPL respectfully requests rate relief that will produce an increase in total annual
revenues of $516.5 million beginning January 2013, and an additional step increase of $173.9
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million in annual revenues beginning when the Canaveral Modernization Project is placed in
service (the "Canaveral Step Increase "), which currently is projected to occur on June 1, 2013.
The decision to meet customers' 2013 need for power with the Canaveral Modernization Project
is projected to save customers about $600 million over the life of the project. However, to
achieve these savings for our customers, it is necessary that FPL's investors be adequately
compensated for the use of their capital.
19. FPL's currently authorized ROE mid -point is only 10 percent, the lowest
authorized by this Commission for an electric utility in 50 years and clearly inadequate for a
company with FPL's risk profile and investment requirements. The requested rate increases will
provide FPL with a reasonable opportunity to earn a fair rate of return on the Company's
investment in property used and useful in serving the public, including an ROE range of 10.25
percent to 12.25 percent, with a midpoint of 11.25 percent. FPL also requests an ROE
performance adder of 25 basis points, which recognizes FPL's outstanding performance and
service. FPL proposes that it would continue to be allowed the opportunity to earn this adder so
long as its typical residential bill remains the lowest in the state, but would reduce its base rates
to reflect the removal of the adder for the calendar year following a relevant prior twelve -month
period in which this is not the case.
20. It is important to recognize that ROE is only one component of a company's
overall cost of capital. FPL's proposed overall cost of capital in the test year is 7.0 percent,
which is very low. That low cost of capital is passed directly on to customers and helps to
maintain FPL's low typical bill level. Approving FPL's requested ROE is fully consistent with
maintaining customer affordability. An appropriate ROE will allow FPL to continue the
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extensive program of capital investment that is designed to ensure that bills remain affordable far
out into the future.
21. The details of the rate base, O &M expenses, costs of capital and other factors
driving the need for rate relief are more fully reflected in the testimony and exhibits of FPL's
witnesses and the minimum filing requirements ( "MFRs ") and schedules accompanying this
Petition, which are incorporated herein by reference.
2013 Base Rate Increase
22. Current Rates. FPL is currently operating pursuant to the Stipulation and
Settlement that was approved in Order No. PSC -11- 0089 -S -EI (the "2010 Rate Settlement ").
The 2010 Rate Settlement, which expires at the end of 2012, addressed base rates through the
end of 2012 and permitted FPL to offset rising costs through the amortization of non -cash
depreciation surplus credits. Order No. PSC -10- 0153- FOF -EI (the "2010 Rate Order ") directed
FPL to use accelerated amortization of these depreciation credits in lieu of cash earnings; the
2010 Rate Settlement has permitted FPL to vary the amount of the credits taken each year to
address rising costs. Amortization of depreciation credits simply reverses depreciation that
previously had been taken, thus lowering the Company's expenses for the period in which the
credits are used but actually increasing FPL's future costs as rate base is added back to the
Company's books. This mechanism has served as a temporary financial bridge, providing some
level of reassurance to investors by allowing FPL to maintain its ROE at 11 percent during the
term of the 2010 Rate Settlement. However, it is not a sustainable approach to meeting actual
cost increases and investment needs going forward.
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23. Test Year. The projected period from January 1, 2013 through December 31,
2013 serves as the test year upon which FPL has calculated its revenue deficiency in this case
(the "2013 Test Year "). The test year in a rate case provides an appropriate period of utility
operations to analyze so the Commission can set reasonable rates for the period the new rates
will be in effect. The 2013 Test Year has been used to prepare this case because it best
represents expected future operations in the period immediately after the new base rates go into
effect in January 2013. The 2013 Test Year will best match projected revenues with the
projected cost of service and investment required for the period after the new rates become
effective.
24. FPL's use of a 2013 Test Year is also fully consistent with Commission rule,
Commission precedent, and Florida law. Rule 25- 6.140(1)(a), Florida Administrative Code,
requires that a company notify the Commission of its selected test year and expressly
contemplates that a utility may use a projected test year. Moreover, the Commission has
approved the use of projected test years for decades, and the Supreme Court of Florida has
recognized that the Commission has the authority to do so. See, e.g., Southern Bell Tel & Tel.
Co. v. Public Serv. Comm'n, 443 So. 2d 92, 97 (Fla. 1983).
A. Major Factors Necessitating a Rate Increase and Estimate of Revenue
Requirements
25. FPL's need for 2013 rate relief can be best understood by contrasting conditions
in 2012 and 2013, and by looking at the major drivers of increased revenue requirements in 2013
versus the 2010 test year that was used in FPL's last base rate case.
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i. Changed conditions from 2012 to 2013
26. FPL's ability under the 2010 Rate Settlement to vary the amount of depreciation
surplus that it amortizes each year has provided needed flexibility to allow the Company to
maintain an 11 percent ROE over the settlement term. At the same time, that flexibility has
masked the substantial and growing cost pressures FPL faces. FPL projects that it will have to
amortize $526 million of depreciation surplus as non -cash earnings in 2012 to offset those cost
pressures. For 2013, however, FPL expects to have $335 million less depreciation surplus
available to amortize. Together with the impact of the increase to rate base resulting from the
amortization in 2010 -2012, this creates a need for $367 million of additional revenues in 2013
compared to 2012.
27. Furtheimore, the 2010 Rate Settlement only permits FPL to earn up to an 11
percent return on equity. This is below an appropriate equity return for FPL of 11.5 percent. As
part of the give and take of settlement negotiations, FPL agreed to accept this lower return on
equity for the limited duration of the 2010 Rate Settlement. The additional revenue requirements
associated with allowing FPL an opportunity to earn an appropriate equity return is $80 million.
28. Finally, FPL will be adding the. Canaveral Modernization Project in mid -2013,
which will increase revenue requirements by about $173.9 million compared to 2012. Other net
revenue requirements of approximately $70 million also contribute to FPL's need for rate relief
in 2013.
29. In short, while the 2010 Rate Settlement has allowed FPL to consistently maintain
an 11 percent return on equity during its 2010 — 2012 teiui, it does not and cannot provide any
solution to FPL's need for additional revenues beyond that term. FPL's requested base rate
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increase is necessary to allow FPL to meet cost pressures and sustain investment in a way that
will continue to produce superior value for customers.
ii. Major drivers increasing FPL's revenue requirements since the last rate case
30. FPL's proposed 2013 base rate increase is needed to address increased revenue
requirements since 2010, the test year last used for establishing base rates. The primary drivers
of the change in January 2013 revenue requirements are: (1) the impact of inflation; (2) a
difference in the weighted cost of capital due to the necessary increase in the authorized return
on equity partially offset by decreases in other elements; (3) investments in infrastructure that
provide long -term economic and/or reliability benefits to customers; (4) the cumulative impact of
the accelerated depreciation surplus amortization required by the 2010 Rate Order and effected
through the 2010 Rate Settlement; (5) system growth; and (6) increased expenditures required
for regulatory compliance. The increase is partially offset by productivity gains as well as
projected revenue increases. As noted above, FPL also will be bringing the Canaveral
Modernization Project into service in mid -2013, which will add $173.9 million of revenue
requirements that had no counterpart in the 2010 test year of FPL's last base rate case.
31. System growth ($65 million). The system growth driver addresses the revenue
requirements associated with new service accounts and customer growth, excluding the
Canaveral Modernization Project and West County Energy Center Unit 3 ( "WCEC 3 "). From
2010 through 2013, FPL estimates that it will add nearly 100,000 new service accounts.
Revenue requirements to support this growth include the costs of expanding the transmission and
distribution infrastructure and the corresponding increase to the costs associated with operating
and maintaining those facilities and serving those accounts. By way of example, investment in
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distribution infrastructure to support new service accounts is projected to add approximately $20
million in revenue requirements. To meet forecasted growth and changing load patterns, FPL
will incur costs that will add $14 million of revenue requirements to perform growth- related
upgrades to the transmission system. The Bobwhite- Manatee transmission expansion project is
a significant example of this type of needed infrastructure expansion.
32. Long Term Infrastructure Investments ($116 million). The Company has made
and continues to make investments that provide direct O &M expense savings, increase system
efficiency, provide fuel and emission savings, and enable the Company to maintain or improve
system reliability. A few examples include:
a. From 2011 through 2013, the Company will have invested more than $250
million in upgrading the hot gas path parts of its combustion turbine ( "CT ") fleet. In
addition, other overhaul - related expenditures of more than $750 million from 2010 to
2013 will be performed on the CT sites in order to continue to provide cleaner and more
efficient energy production customer benefits over the period. These initiatives will
immediately improve system efficiency and reduce the overall fuel consumption rate,
with the savings passed directly to FPL customers through the fuel clause.
b. During 2011 -2013, FPL will have invested more than $400 million to complete its
Advanced Meter Infrastructure, or "smart meter," initiative. This initiative will provide
customers with the opportunity to better understand and manage their energy use and
realize savings through the use of the smart meter tools while further improving service
and reliability for FPL's more than 4.5 million customers.
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c. FPL has invested approximately $190 million in transmission substation
equipment replacement and refurbishment and reliability improvement programs.
Likewise, approximately $730 million has been invested in distribution improvements to
continue to strengthen FPL's distribution system. These investments minimize customer
interruptions, significantly improve restoration time and extend the lives of assets.
33. Regulatory Commitments ($56 million). This driver reflects the growth in
revenue requirements (associated with both increased investment and O &M expenses) from
2011 to 2013 related to FPL's commitments to state and federal governmental and regulatory
bodies. During this period, FPL expects to incur $315 million in storm- related commitments to
this Commission, $116 million in increased compliance costs for North American Electric
Reliability Corporation and Federal Energy Regulatory Commission reliability matters and $36
million in Nuclear Regulatory Commission mandates.
34. Inflation ($162 million). Inflation represents the increased costs for goods and
services in 2013 compared to the same goods and services in 2010. The Consumer Price Index
( "CPI ") projection through 2013 indicates that inflation will have added approximately a
cumulative 7.2 percent to the cost of goods and services in 2013 relative to 2010. Additionally,
some of FPL's costs have escalated at rates much faster than CPI despite FPL's efforts to
mitigate these cost increases. The Company's 2013 revenue requirements reflect the increased
cost of providing electric service due to three years of cost escalation.
35. Amortization of Depreciation Reserve Surplus ($104 million). In the 2010 Rate
Order, the Commission directed FPL to amortize $894 million of depreciation reserve surplus as
a credit over the four -year period ending 2013. The 2010 Rate Settlement gave the Company
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flexibility in the timing of that amortization during the 2010 -2012 settlement term, so long as
FPL's ROE did not exceed 11 percent. Thus, through 2012, the amortization mechanism
allowed the Company to offset rising costs with non -cash earnings, but the cumulative impact of
the accelerated depreciation surplus amortization on 2013 revenue requirements amounts to $104
million and is comprised of two items, described below.
a. Reduced Amortization Credit in 2013 Test Year. As a result of the actual and
projected amortization of surplus depreciation in 2010 -2012, FPL projects to have only
$191 million to amortize in the 2013 Test Year as compared to the $223.5 million
reflected in the Commission's 2010 Rate Order. This reduction in the reserve surplus
credit represents a $33 million increase in revenue requirements.
b. Increased Rate Base Due to Accelerated Reversal of Reserve surplus. The 2013
Test Year also includes an increase in average rate base of approximately $687 million
compared to 2010, as a direct result of the prior Commission's accelerated amortization
requirement. This increase in rate base must be supported by additional revenues in
2013. The revenue requirement associated with this incremental rate base is $71 million.
36. Difference in Weighted Average Cost of Capital ($122 million). The 2013
weighted average cost of capital ( "WACC ") is 0.76 percent higher than the WACC that was
approved in the 2010 Rate Order. The difference is primarily driven by the required increase in
ROE from 10 percent to 11.5 percent, partially offset by a reduction due to a higher level of
deferred taxes. WACC also is affected to a lesser extent by a decrease in customer deposit
balances. FPL's projected 2013 equity ratio remains consistent with the ratio approved in the
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2010 Rate Order. In total, the increase in authorized ROE offset by the other capital structure
changes results in increased revenue requirements of $122 million.
37 Productivity Gains ( -$76 million). FPL's productivity initiatives have resulted in
lower 2013 costs for certain activities compared to the costs to perform those same activities in
2010, adjusted for inflation and customer growth. These gains stem from efforts across FPL's
enterprise — including Customer Service, Customer Care, Information Management and Nuclear
management — to keep operating and maintenance expenses down in order to save customers
money without sacrificing service. FPL projects a reduction in revenue requirements of $76
million related to these productivity gains.
38. Revenue Growth ( -$32 million). Retail base revenue resulting from increased
sales reflects modest growth resulting in a decrease in revenue requirements of $55 million.
However, other base revenues decrease by $23 million, resulting in a corresponding increase to
revenue requirements due to lower service charges. The net effect of this projected change in
revenues results in a $32 million decrease of FPL's 2013 revenue requirements.
39. Resulting Revenue Deficiency. The estimated revenue requirement impacts of
these major factors are substantial. The Company's jurisdictional 13 -month average rate base for
the period ended December 31, 2013 is projected to be $21 billion. FPL's jurisdictional net
operating income for the same period is projected to be $1.2 billion using the Company's rates
currently in effect. The total resulting base revenue deficiency in 2013 is $516.5 million.
Furthemuore, absent rate relief, the resulting adjusted jurisdictional rate of return on average rate
base is projected to be 5.50 percent, while the ROE is projected to be only 7.7 percent for the test
year. Thus, FPL requests a total revenue requirements increase of $516.5 million beginning in
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January 2013, with a separate step increase of $173.9 million for the Canaveral Step Increase, to
be effective upon the commercial in- service date of that project currently scheduled to be June 1,
2013.
40. Bill Impact. Even with the proposed rate increase, FPL's typical residential bill is
expected to remain the lowest in the state as compared to the current prices of the other utilities.
The base component of the typical residential bill is estimated to increase from $43.26 in
December 2012 to $48.49 in January 2013 and then to $50.23 in June 2013 as a result of the
increases FPL is requesting in this proceeding. This is an increase of $5.23 in January 2013 and
an additional $1.74 for the Canaveral Step Increase in June 2013 resulting in a total impact of
$6.97 per month or 23 cents per day. Based on current forecasts, FPL projects a concurrent
reduction in fuel costs and other bill impacts that would reduce the total bill impact in 2013 to
approximately $2.48 per month, or about 8 cents per day.
B. Return on Equity and Capital Structure
41. The 2010 Rate Order set the mid -point of FPL's authorized ROE at 10 percent,
the lowest ROE authorized by this Commission for an electric utility in the past 50 years and in
the bottom third of ROEs allowed nationally. A substandard ROE places FPL at a competitive
disadvantage in seeking to attract capital at a time when it is engaged in the Largest capital
investment program in the Company's history. The investment community took notice: on
March 11, 2010, shortly after the 2010 Rate Order was issued, S &P downgraded FPL's corporate
credit rating and Moody's followed suit on April 9, 2010. The 2010 Rate Settlement enabled
FPL to earn 11 percent through 2012, albeit through the use of a mechanism that relied upon
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non -cash earnings. While closer to FPL's true cost of equity, an ROE of 11 percent remains
substandard for a company with FPL's risks and investment requirements.
42. In this case, FPL requests that it be allowed the opportunity to earn an ROE range
of 10.25 percent to 12.25 percent, with a midpoint of 11.25 percent. This range is fair and
reasonable, and it is appropriate to assure that FPL has the financial strength to continue
providing enhanced value to its customers and to respond to unforeseen financial impacts that
FPL may experience in the future. A strong credit rating is necessary to protect the Company's
ability to absorb challenges in capital markets as well as potential shocks associated with
devastating hurricanes, volatile fuel pricing, and disruptions in energy supply. Any combination
of events could adversely impact FPL's ability to serve customers if its financial strength is
j eopardized.
43. FPL also seeks an ROE performance adder of 25 basis points, which recognizes
FPL's outstanding operational performance and is contingent upon FPL maintaining the lowest
typical residential bills in Florida among the state's 55 utilities.
44. If FPL does not maintain the lowest typical residential bill in the state, based on a
12 month average, FPL would reduce rates to remove the ROE performance adder for the
following calendar year. Likewise, rates would be increased prospectively on a calendar year
basis at such time as FPL's rates were again the lowest in Florida. Specifically, each September,
in conjunction with FPL's annual fuel filing, FPL will prepare and submit to the Commission a
comparison of its typical residential bill to the other Florida utilities for the prior 12 months. The
comparison will be based on publicly available data from the Commission's web site, the Florida
Municipal Electric Association bill survey, the JEA bill survey, and the Reedy Creek
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Improvement District web site. If the annual comparison shows that FPL's typical residential
bill is not the lowest on average over the past 12 months, FPL's proposal would reduce rates by
0.040¢ per kWh effective January 1 of the following year. If, in subsequent years, FPL's typical
residential bill is again the lowest on average for the prior 12 months, FPL's proposal would
reinstate the ROE Performance adder and increase rates by the same amount per kWh effective
January 1 of the following year.
45. FPL's proposal for an ROE perfoitnance adder is consistent with the
Commission's authority and also its past policy and practice. In setting rates, the Commission
may "give consideration, among other things, to the efficiency, sufficiency, and adequacy of the
facilities provided and the services rendered; the cost of providing such service and the value of
such service to the public." Section 366.041(1), Florida Statutes (2012) (emphasis added). In
Docket No. 010949 -EI, for example, the Commission rewarded Gulf Power Company ("Gulf")
with a 25 basis point adder to the mid -point ROE in recognition of Gulf's past performance and
as an incentive for Gulf s future perfoiniance. Similarly here, consideration of the statutory
factors supports adding a 25 basis point performance incentive to FPL's ROE.
46. A 25 basis points ROE performance adder would serve as an appropriate positive
incentive for FPL to continue its pursuit of outstanding performance and service that results in
keeping rates low for customers. At the same time, this incentive to FPL would be an important
signal to other companies as to the importance of, and the Commission's willingness to
recognize, performance and service achievements in establishing a utility's rates.
47. FPL proposes an equity ratio of 59.6 percent based on investor sources (46.0
percent based on all sources). This is consistent with the capital structure that FPL has
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maintained for many years and with the equity ratio approved by the Commission and deemed
appropriate in the 2010 Rate Order. FPL's requirements for financial strength have in no way
diminished in the past three years (if anything, the requirements have increased), so there is no
reason to reduce FPL's equity ratio in this proceeding. Because FPL has maintained essentially
the same capital structure for many years, any change in this proceeding likely would raise
questions in investors' minds and would be viewed as a negative departure from past practice.
Canaveral Step Increase
48. The Commission made a unanimous affinuiative deteuuination of need for the
Canaveral Modernization Project in Order No. PSC -08- 0591- FOF -EI, issued September 12,
2008, in Docket No. 080246 -EI. The Canaveral Modernization Project is projected to save
customers hundreds of millions of dollars in fuel costs and significantly reduce greenhouse gas
emissions. The current estimated construction cost for the Canaveral Modernization Project is
$976 million, which is $139 million lower than the estimate of $1.115 billion reflected in the
Final Order.
49. FPL expects to bring the Canaveral Modernization Project into commercial
operation in June 2013. The 2013 test year results that form the basis for FPL's requested
increase in January 2013 exclude the Canaveral Modernization Project's impact on rate base and
operating expenses. Instead, FPL requests a Canaveral Step Increase of $173.9 million for the
revenue requirements associated with the first twelve months of the Canaveral Modernization
Project's commercial operation, which adjustment would be effective on the commercial in-
service date. FPL will request that its 2013 fuel cost recovery factors be reduced as of June 1,
2013 to reflect the fuel savings resulting from the facility's highly efficient gas -fired combined
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cycle technology. This rate change synchronization is consistent with past Commission action in
proceedings that addressed the additional costs associated with power plants scheduled to be
placed in service shortly after the effective date of new rates. See, e.g., In re Tampa Elec. Co.,
273 P.U.R.4th 177 (Fl. P.S.C. April 30, 2009) (Order No. 09- 0283- FOF -EI).
Transfer of West County Energy Center Unit 3 to Base Rates
50. Pursuant to the terms of the 2010 Rate Settlement, the revenues associated with
WCEC 3 are being collected through FPL's Capacity Cost Recovery Clause. FPL currently
records all WCEC 3 costs to base rate accounts in its books and records. The revenues collected
for WCEC 3 through the Capacity Cost Recovery Clause are initially recorded as clause
revenues and are then reclassified on FPL's books and records to base rate recovery via a
monthly journal entry, in order to properly match the reporting of costs and associated revenues.
FPL's monthly earnings surveillance reports currently reflect this treatment, and FPL's 2013
Test Year MFRs will continue to do so.
51. The 2010 Rate Settlement envisions transfer of recovery for WCEC 3 costs to
base rates concurrent with FPL's next base rate proceeding. FPL requests such transfer in this
proceeding. Based on the above - described accounting treatment, transferring recovery of WCEC
3's costs to base rates will not require any change in treatment for costs or revenues associated
with WCEC 3. Furthermore, the transfer will require no accounting adjustment to the test year
MFRs. The transfer would simply move these costs that are currently recovered through the
Capacity Cost Recovery Clause to recovery through base rates.
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Storm Cost Recovery
52. FPL's latest comprehensive Storm Loss and Reserve Perfoiniance Analysis was
performed in 2009 and showed that FPL can expect to incur, on average, approximately $150
million per year in storm restoration costs. FPL is not requesting an accrual to its storm reserve
at this time, however. Rather, FPL proposes for the immediate future to continue recovering
prudently incurred storm costs under the framework prescribed the 2010 Rate Settlement. If FPL
incurs storm costs related to a named tropical storm, FPL may collect up to $4 per 1,000 kWh
(roughly $400 million), beginning 60 days after filing a petition for recovery with the
Commission, without the application of any form of earnings test or measure and irrespective of
previous or current base rate earnings or level of theoretical depreciation reserve. This interim
period may last up to 12 months. If FPL's costs related to named storms exceed $800 million in
any one year, the Company also may request that the Commission increase the $4 per 1,000 kWh
accordingly. This cost recovery mechanism may also be used to replenish the Company's storm
reserve. Any storm costs not recovered under this mechanism are deferred on the balance sheet
for recovery beyond the initial 12 -month period as determined by the Commission. The specific
details of the recovery mechanism are spelled out in Paragraph 3 of the 2010 Rate Settlement.
Supporting Documents
53. FPL is filing simultaneously with this Petition, and incorporates by reference,
MFRs containing the information required by Rule 25- 6.043(1)(b), Florida Administrative Code.
FPL compiled the MFRs by following the policies, procedures and guidelines prescribed by the
Commission in relevant rules and/or in the Company's last rate case. Also included with this
Petition are schedules (the "Canaveral Step Increase Schedules ") showing FPL's proposed
23
Docket No. 120015 -EI
Florida Power & Light Company
Petition
adjustment to reflect the addition of the Canaveral Modernization Project in June 2013, and
FPL's calendar year 2013 forecast results with the Canaveral Step Increase. Additionally, the
supporting testimony and exhibits of FPL's witnesses are being pre -filed contemporaneously
with this Petition.
54. Attached to MFR No. E -14 and to Canaveral Step Increase Schedule No. E -14 are
appropriate tariff sheets, including new rate schedules designed to produce the additional
revenue sought by this Petition and needed to give the Company a fair opportunity to earn a
reasonable rate of return beginning January 2013, and again, upon the commercial in- service
date of the Canaveral Modernization Project (projected to be June 1, 2013). FPL respectfully
requests that the Commission consent to these rate schedules going into operation beginning on
the first billing cycle of January 2013, and upon the commercial in- service date of the Canaveral
Modernization Project, as applicable.
Disputed Issues of Material Fact
55. FPL states that this Petition seeks to initiate proceedings that may involve
disputed issues of material fact. This case does not involve reversal or modification of an agency
decision or an agency's proposed action. Therefore, subparagraph (c) and portions of
subparagraphs (b), (e), (f) and (g) of Rule 28- 106.201(2) are not applicable to this Petition. It is
not known which, if any, of the issues of material fact set forth in the body of this Petition, or in
the testimony, exhibits and minimum filing requirements filed herewith, may be disputed by
others planning to participate in the proceeding initiated by this Petition. All other requirements
for petitions filed under Rule 25- 106.201, Florida Administrative Code, have been met in the
body of this Petition.
24
Docket No. 120015 -EI
Florida Power & Light Company
Petition
WHEREFORE, for the above and foregoing reasons, Florida Power & Light Company
respectfully petitions the Florida Public Service Commission to:
(1) Accept this filing for final agency action;
(2) Set an early hearing in order to reduce the risk of possible delays that may be
occasioned by hurricane season;
(3) Enter a final decision approving rates on or before November 19, 2012, i.e.,
within 8 months of the filing of this Petition, so as to render the final decision in
time to make rates effective by January 2, 2013 following 30 days' notice to
customers;
(4) Find and determine that the Company's present rates are insufficient to yield a
fair rate of return beginning in January 2013;
(5) Authorize the Company to revise and increase its base rates and charges to
generate additional gross revenues of $516.5 million on an annual basis beginning
January 2, 2013, so that FPL will have an opportunity to earn a fair overall rate of
return, including a rate of return of 11.50 percent on common equity capital,
which includes a .25 percent ROE performance adder that recognizes FPL's
outstanding operational performance and is contingent upon FPL maintaining the
lowest typical residential bill in Florida. This ROE would peiniit the Company to
maintain its financial integrity and ability to serve the public adequately and
efficiently;
(6) Approve the following mechanism for applying the ROE performance adder:
25
Docket No. 120015 -EI
Florida Power & Light Company
Petition
i. Each September, in conjunction with FPL's annual fuel cost recovery
filing, FPL will prepare and submit to the Commission a comparison of its
typical residential bill to the other Florida utilities for the prior 12 months.
ii. If FPL maintained the lowest typical residential bill in the state based on
an average of those prior 12 months, no adjustment would be made to
FPL's rates for the following calendar year.
iii. If FPL did not maintain the lowest typical residential bill in the state based
on an average of those prior 12 months, FPL would reduce its base rates
by 0.040 cents per kWh to remove the effect of the ROE performance
adder on a prospective basis, starting at the beginning of the following
calendar year.
iv. FPL's base rates would remain at the reduced level until FPL established
in a subsequent fuel cost recovery filing that it once again had the lowest
typical residential bill in the state based on an average of the prior 12
months, at which time FPL's base rates would be increased by 0.040 cents
per kWh at the beginning of the following calendar year to restore the
effect of the ROE performance adder.
(7) Approve an equity ratio of 59.6 percent based on investor sources (46.0 percent
based on all sources);
(8) Find and determine that the Canaveral Step Increase is necessary and appropriate
to recover the additional revenue requirements associated with the Canaveral
26
Docket No. 120015 -EI
Florida Power & Light Company
Petition
Modernization Project; and allow FPL to revise and increase its retail base rates
and charges to generate additional incremental gross revenues of $173.9 million
effective upon the commercial in- service date for the Canaveral Modernization
Project (projected to be June 1, 2013), to recognize the cost impacts associated
with the addition of that unit;
(9) Approve the transfer of WCEC 3 cost recovery from the Capacity Cost Recovery
Clause to base rates;
(10) Approve continuation of the storm cost recovery mechanism set forth in
Paragraph 3 of the 2010 Rate Settlement;
(11) Approve the other Company adjustments set forth in the MFRs submitted with
this Petition;
(12) Approve the relevant tariff sheets and rate schedules included herein and made
part hereof; and
(13) Grant to the Company such other and further relief as the Commission may find
to be reasonable and proper pursuant to the authority granted to the Commission
under Chapter 366 of the Florida Statutes.
27
Docket No. 120015 -EI
Florida Power & Light Company
Petition
Respectfully submitted,
FLORIDA POWER & LIGHT COMPANY
C.)1,
By: 1 By:
Arma ' • o J. • livera Eric Silagy 1
Chi; Exe tive Officer President
701 U • erse Boulevard 700 Universe Boulevard
Juno teach, Florida 33408 -0420 Juno Beach, Florida 33408 -0420
Wade Litchfield
Vice President and General Counsel
John T. Butler
Assistant General Counsel- Regulatory
700 Universe Boulevard
Juno Beach, Florida 33408 -0420
28
Docket No. 120015 -EI
Florida Power & Light Company
Petition
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a true and correct copy of the foregoing has been furnished
by Hand Delivery* and/or U.S. Mail this 19th day of March 2012, to the following:
Caroline Klancke * J. R. Kelly, Public Counsel*
Keino Young Office of Public Counsel
Martha Brown c/o The Florida Legislature
Office of the General Counsel 111 W. Madison Street, Room 812
Florida Public Service Commission Tallahassee, FL 32399 -1400
2540 Shuinard Oak Boulevard
Tallahassee, FL 32399 -1400
K. Wiseman, M. Sundback, L. Purdy, Robert Scheffel Wright *
W. Rappolt, J. Peter Ripley John T. LaVia, III
Andrews Kurth LLP Gardner, Bist, Wiener, Wadsworth, Bowden,
1350 I Street NW, Suite 1100 Bush, Dee, LaVia & Wright, P.A.
Washington, DC 20005 1300 Thomaswood Drive
Attorneys for South Florida Hospital and Tallahassee, FL 32308
Healthcare Association Attorneys for the Florida Retail Federation
Jon C. Moyle, Jr. *
Vicki Gordon Kaufman
Keefe Anchors Gordon & Moyle, PA
118 North Gadsden Street
Tallahassee, FL 32301
Attorneys for Florida Industrial Power
Users Group
By: ' 1 4i'G�e�. t4
` R. Wade Litchfield
Authorized House Counsel No. 0062190
29
CITY OF EDGEWATER
RECEIVED
A!h
i..
FPL;
errs'O[_k F;k(
April 5, 2012
Dear Government Official:
RE: Florida Power & Light Company Petition for Base Rate Increase
Rule 25-22.0406(4), Florida Administrative Code
Recently I sent you a copy of Florida Power& Light Company's (FPL's) petition to the Florida Public
Service Commission (PSC) for a base rate increase, which we filed on March 19, 2012, with new
rates to be in effect the first billing cycle in January 2013. The purpose of this letter is to provide you
a synopsis of FPL's request, as required by the above-referenced rule.
With the proposed base rate increase and the recent estimates for fuel and other components of
electric service, FPL's typical 1,000-kWh residential bill is projected to increase by about $2.48 a
month, or about 8 cents per day compared to today's bill. This includes the proposed base rate
increase of$6.97 a month, or about 23 cents a day, offset in part by an estimated $4.49 a month
net decrease in other components of a typical 1,000-kWh residential customer bill in 2013.
For business customers, due to fuel efficiency savings, recent projections of fuel prices, and other
expected changes to base rates and clauses in 2013, the net impact on total bills is estimated to
range from a decrease of 3 percent to an increase of 4 percent.
We expect that, even with the requested rate change, our customer bills will still be the lowest in the
state and well below the national average.
In fact, from 2006 to 2012, FPL's total 1,000-kWh residential customer bill has decreased 13
percent. FPL's business customer bills have decreased, on average, 14 percent during the same
time period.
The Company's request reflects an adjustment to its base annual revenue requirements of
approximately $690.4 million. Key elements underlying the company's request include:
• The impact of inflation on the cost of many materials and products needed to provide
affordable, reliable power
• The need to earn a fair rate of return on that portion of the $9 billion in investment being
addressed in this case, including clean, fuel efficient generation and storm hardened
infrastructure
• Cost recovery for the new Cape Canaveral Next Generation Clean Energy Center, which will
use 33 percent less fuel per megawatt-hour of power generated and far fewer emissions
than the former plant
• The need to address the impact of the accelerated amortization of non-cash surplus
depreciation, which was part of a 2010 base rate case settlement
• The anticipated addition of nearly 100,000 new customers between the end of 2010 and the
end of 2013
• A proposal to adjust return on equity (ROE) to 11.25 percent, which falls within the range of
currently allowed ROEs for other investor-owned utilities in the state, along with a proposed
0.25 percent ROE Adder so long as we continue to maintain the lowest bill in the State
We know there is never a good time for a rate increase, and we are particularly mindful that the
economy remains uncertain. We've worked hard to minimize the required increase, and we're
committed to working equally hard to make sure our customers continue to have the lowest electric
bills in the state, reliability that is among the best in the country and top-notch customer service.
Clean, low-cost, high-quality electric service is a competitive advantage for our customers and our
state.
Copies of the enclosed synopsis, which includes quality of service and technical hearing dates, also
are being distributed to each main county library in the areas served by FPL. Please do not hesitate
to call me at (561) 691-7114 if you have any questions or concerns, or if you would like to discuss
this matter further.
Sincerely,
604wL6.,
Pamela Rauch
Vice President, Development and External Affairs
•
I. EXECUTIVE SUMMARY OF THE RATE CASE
On March 19, 2012, Florida Power & Light Company ("FPL") filed a petition for
a general rate proceeding with the Florida Public Service Commission ("FPSC" or
"Commission") pursuant to Chapter 366, Florida Statutes. FPL is seeking approval of
(i) a permanent increase in rates and charges sufficient to generate additional total annual
revenues of$516.5 million to be effective January 2, 2013 (the first billing cycle day of
January 2013), (ii) a base rate step adjustment of $173.9 million for the new, more
efficient generation facility currently under construction at Cape Canaveral (the
"Canaveral Modernization Project") to be effective when the plant goes into service
(currently scheduled to be June 1, 2013), (iii) the opportunity to earn an 11.25% rate of
return on the Company's common equity capital ("return on equity" or "ROE"), and a
0.25% ROE performance adder, which FPL proposes would remain in effect only while it
maintains the lowest typical residential customer bill (1,000 kWh) in the state, (iv) an
equity ratio of 59.6% based on investor sources (46.0% based on all sources); (v) the
transfer of cost recovery for West County Energy Center 3 from the Capacity Cost
Recovery Clause to base rates; (vi) continuation of the existing framework for
recovering prudently incurred storm costs, and (vii)the tariff sheets, rate schedules and
other Company adjustments set forth in the Minimum Filing Requirements (MFRs)
submitted with FPL's petition.
FPL expects that the total proposed rate adjustment in this proceeding will
increase the base portion of the bill for a typical residential customer using 1,000 kWh a
month by $6.97, or about 23 cents per day. Due to fuel efficiency savings, lower fuel
costs and other changes that will be reflected on customer bills, the total bill for a typical
residential customer is projected to increase by a much smaller amount: $2.48 per month,
or about 8 cents per day. To maintain the level of service and reliability that FPL's
customers expect and deserve, FPL must continue investing in system reliability, fuel
efficiency and cleaner energy.
FPL is currently operating pursuant to the Stipulation and Settlement approved by
the Commission in 2010, which was based on a 2010 test year. The 2010 Rate
Settlement addresses base rates through the end of 2012, and expires at the end of 2012.
FPL proposes to adjust rates at the beginning of 2013, once the Rate Settlement expires.
Therefore, FPL has used the projected period from January 1, 2013 through December
31, 2013 as the test year for calculating increased revenue requirements since 2010. The
2013 Test Year best represents expected future operations in the period immediately after
the new base rates go into effect in January 2013 and will best match projected revenues
with the projected cost of service and investment required for that period.
As described in the Company's testimony, FPL provides its residential customers
with a typical 1,000 kWh bill that is the lowest of Florida's 55 electric utilities and 25%
lower than the national average, while at the same time delivering excellent service and
reliability. FPL is a leader in key industry categories such as reliability, low emissions
and conservation. FPL's ability to deliver such superior value is the result of, among
other things, FPL's long-term strategy of sustained investment in modern fuel-efficient
technologies and its commitment to manage operating costs efficiently. For example, the
addition of highly efficient generating units and improvements in the operating
characteristics of FPL's existing generating fleet has resulted in a cumulative $5.5 billion
reduction in fuel costs from 2001 through 2011, and every dollar of those savings has been
passed on to customers.
2
Meanwhile, the costs of every day goods and services have risen considerably.
According to the Consumer Price Index, the cumulative increase in inflation was 14.2%
from 2006 to 2012, with some goods and services experiencing much sharper increases.
FPL's focus on efficiency and productivity has lessened the impact of inflation, but the
Company is not immune to it. Just like everyday goods, the costs of many products that
the Company must purchase in order to provide affordable, reliable power have risen
significantly and contribute to the need for rate relief.
Notwithstanding these rising costs, FPL must plan ahead and make sound
investments in smarter, cleaner and efficient infrastructure to ensure that it can continue
to deliver reliable and affordable energy now and in the future. From 2011 through 2013,
FPL will have invested approximately $9 billion in infrastructure, or an average of
approximately $3 billion annually. These investments provide operation and
maintenance expense savings, increase system efficiency, provide fuel and emission
savings, and enable the Company to maintain or improve system reliability.
In addition to the impact of inflation and investments in infrastructure, the other
primary drivers of the change in FPL's January 2013 revenue requirements are: (i) a
difference in the weighted cost of capital due to the proposed increase in the authorized
return on equity partially offset by decreases in other elements; (ii) the cumulative impact
of the accelerated depreciation surplus amortization required by the rate order issued by
the Commission and effected through the 2010 Rate Settlement; (iii) system growth; and
(4) increased expenditures required for regulatory compliance. Those increases are
partially offset by productivity gains as well as projected revenue increases.
3
FPL also requests a base rate step adjustment of $173.9 million to be effective
when the Canaveral Modernization Project goes into service in June 2013. This
adjustment represents the revenue requirements associated with the first twelve months of
the plant's operation. The Canaveral Modernization Project, for which the Commission
unanimously granted an affirmative determination of need in 2008, is projected to save
customers about $600 million over the life of the project due to reduced fuel costs and
significantly reduced greenhouse gas emissions. The current estimated construction cost
for the Canaveral Modernization Project is $976 million, which is $139 million lower
than the estimate of $1.115 billion reflected in the Commission's order approving the
need for the Project. Additionally, FPL will request that its 2013 fuel cost recovery
factors be reduced as of June 1, 2013 to reflect the fuel savings resulting from the
facility's highly efficient gas-fired combined cycle technology.
In return for the investment FPL makes to provide customers with reliable, clean
and affordable electric service, shareholders must be provided with the opportunity to
earn a reasonable and adequate return on their investment. The Supreme Court of the
United States has determined that a reasonable and adequate return on investment is one
which is commensurate with returns that would be earned on investments with
corresponding risks and should be sufficient to assure confidence in the financial integrity
of the enterprise, so as to maintain and attract capital. Absent rate relief, the Company
projects that it would earn an ROE of 7.7%in 2013, which falls below the level needed to
assure confidence in FPL's financial integrity.
Accordingly, FPL now requests the opportunity to earn a fair rate of return, and
that rates be based on an ROE of 11.5%, which includes an ROE performance adder of
4
25 basis points. FPL proposes that it would continue to be allowed the opportunity to
earn this adder so long as its typical residential bill remains the lowest in the state based
on a comparison of FPL's typical bill to other Florida utilities on average over the prior
12 months. With the proposed ROE of 11.5%, the Company's overall cost of capital for
the test year is 7.0%, which is relatively low. Customers benefit directly from this low
cost of capital, which helps to maintain FPL's low typical bill.
FPL recognizes that no increase in price is ever welcomed. The Company has
worked hard to minimize the required increase and expects that, even with the requested
increase FPL's typical residential bill will remain the lowest in the state of Florida
compared to the current rates of the other utilities and would still be well below the
national average. Indeed, while the prices of groceries, healthcare and gasoline increased
20%, 24% and 41%, respectively, from 2006 to 2012, FPL's typical residential bill
during that period decreased by 13%. FPL's proposal will support continued investment
in improving fuel efficiency, generating cleaner energy and enhancing system reliability
while keeping customer bills low and will provide FPL the opportunity to maintain a
strong financial position, which directly benefits customers.
5
II. COMPARISON OF THE PRESENT AND PROPOSED RATES FOR
CUSTOMER RATE CLASSES
Attached to this synopsis are MFR schedules A-3 for the test year, which provide
a comparison of the present rates and proposed 2013 rates, as well as Canaveral Step
Increase Schedules A-3, which provide a comparison of the rates for the proposed
Canaveral Step Adjustment in June 2013.
III. ANTICIPATED MAJOR RATE CASE ISSUES
The issues listed below are those that are currently anticipated by the Company to
be among the major areas considered:
1. What is FPL's rate base in the test year?
2. What are FPL's test year working capital amounts?
3. What is FPL's test year cost of capital?
4. What is FPL's test year net operating income?
5. What are FPL's test year revenue requirements?
6. What is the proper Return on Equity for the test year?
7. What is the proper revenue requirement adjustment for the Canaveral
Modernization project?
8. Should the Commission award an ROE adder?
IV. DESCRIPTION OF THE RATEMAKING PROCESS
A. What parties are involved in the ratemaking process?
A particular utility's rate case can involve a number of different parties;
however, the case always involves:
1. The FPSC Commissioners - The governing body of a utility rate case
in Florida is the Florida Public Service Commission. The FPSC is made up of
five Commissioners who are all appointed by the Governor. Those
6
commissioners preside over the rate case, and all decisions on the issues raised in
the case will be made based on the evidence presented.
2. The FPSC Staff - The Commission is supported by a staff of
professionals, including engineers who conduct inspections of various premises
and equipment, accountants who conduct audits of utilities' relevant accounts,
rate and financial analysts, consumer affairs specialists who investigate
complaints filed against the utility, and attorneys who assist with legal issues.
The FPSC staff plays an integral role in assisting the Commission in processing a
rate case.
3. The Office of Public Counsel - The citizens of Florida are
represented in every major rate case by the Office of Public Counsel ("OPC").
The OPC is staffed by attorneys, accountants, and rate and financial analysts. The
Public Counsel, who is appointed by the state legislature, may also bring in
outside consultants who will testify as expert witnesses during a rate case. The
OPC analyzes the information a utility files, and may also present testimony from
expert witnesses and citizens of the state who would like to testify during the
course of the rate case.
4. The Utility - As with any proceeding in front of the Commission, the
utility itself plays a significant role in a rate case. Through the Officers and
support staff, utilities provide critical information concerning operations,
revenues, costs, and future economic forecasts. The utility may call witnesses to
testify and may employ independent professionals to serve as expert witnesses.
5. The Intervenors - In a rate case, any party whose interests are
substantially affected by the outcome of the case may file a petition with the
FPSC to be an intervenor. As with any other party to a rate case, an intervenor
may produce evidence, ask questions, and conduct direct and cross examinations
of witnesses. Intervenors are most commonly customers or customer groups,
including industrial or commercial organizations.
B. What is involved in the ratemaking process? What information is
considered?
1. A rate case commences with the utility submitting a letter to the
FPSC informing the Commission of its intention to request a rate increase, and
subsequently supplying the "test year" and filing date information.
2. The utility next files a formal request for a rate increase. In
accordance with Commission Rules, this request must include properly completed
Minimum Filing Requirements ("MFRs"). In conjunction with the filing of direct
testimony of its witnesses, a utility's MFRs provide all parties with information
about the financial condition of the utility. The MFRs contain facts and figures
about a utility's costs, investments, and operations for the specified test year. As
7
required by law, it is up to the utility to prove that the requested rate increase is
necessary.
3. Pursuant to Florida law, the new rates will go into effect within eight
months of the utility's filing. If the Commission has not made its decision by that
time, the new rates collected by the utility are held subject to refund, pending the
Commission's final decision. The Commission must issue its final order on the
request within 12 months of the "commencement" date, which is the date that the
Commission determines that the Company's filing is complete. This period
allows the Commission, along with FPSC Staff, the OPC, and any intervenor,
time to compile all available information about the utility. Information requests
may cover everything from what costs the utility incurs to how much it is charged
in taxes. These requests may also ask for more information regarding a utility's
construction expenditures, or other operating and financial matters. Meanwhile,
the FPSC staff accountants will conduct an audit of the utility's accounts and
records. During this time period, additional testimony may be filed by FPSC
Staff or any party pursuant to the schedule adopted by the FPSC.
4. Before a utility can take any action concerning the rates it charges its
customers, the matter must be presented to the Commission in hearing settings.
These hearings are run in accordance with rules that are similar to those that
courts employ. Information is presented through the use of testimony, and the
witnesses are subsequently subject to cross-examination. When the final decision
is reached, only information collected during the hearing may serve as a basis for
this decision.
a. The first hearings in a rate case — called "service hearings" —
commence not long after filing and are scheduled by the FPSC. These
service hearings take place throughout a utility's service area and provide
the utility's customers an opportunity to discuss their experiences with the
utility. These experiences, positive or negative, provide a basis for future
issues that the Commission may choose to investigate prior to the
resolution of the rate case.
b. The next hearing is much more technical. This hearing affords
the parties an opportunity to present witnesses and to cross-examine other
parties' witnesses. The information collected from the witnesses at this
hearing is more focused on the financial issues that are being decided and
testimony is usually quite extensive. It is not uncommon for this hearing
to continue for a number of days. As information about various costs or
expenditures is presented, the Commission is charged with determining
which costs are necessary and prudent. Those that are not deemed to be
necessary and prudent are excluded from the utility's rate base and
consequently not charged to the ratepayers.
8
c. Similar to what is done in court, the hearings are transcribed by a
court reporter. The court reporters type out everything that is said during
the hearings and create transcripts of the day's events. In large cases, these
transcripts can total hundreds, if not thousands, of pages.
5. When the hearings are over, the parties must file legal briefs
summarizing their legal positions and arguments. The FPSC staff then evaluates
these briefs in light of the evidence received at the hearings and develops formal
recommendations that the Commission considers as it makes its final decision. All
information filed with the Commission is made available to the public in
Tallahassee except for information determined to be proprietary confidential
business information that is exempt from public disclosure. The utility's MFRs
are made available to the public in the utility's offices located in Juno Beach and
Miami and at the locations listed in Section VI, below.
6. A vote is scheduled to occur at a Special Agenda Conference in
November 2012. The final decision is recorded on a vote sheet, which lists the
numerous issues that require a decision to be made by the Commissioners.
Reviewing the information can be quite time consuming, and in large cases, this
process may require several days work.
7. The final step in a rate case is for the Commission to issue an order
that embodies the final decision reached by the Commissioners. The order will
state the background of the rate case, the decisions made, and the basis for those
decisions. This order will also discuss any changes in the utility's rates and
charges, and the dates that any new rates and charges are to take effect. Upon the
issuance of the order, any party may request that the FPSC reconsider any
particular decision. Following this reconsideration, a dissatisfied party may appeal
to the appropriate court.
V. TIME SCHEDULE
FPL 2012 General Rate Case Schedule
Service Hearings: May 31,2012, 9:30 a.m.
Sarasota
Sarasota City Commission Chambers
Sarasota City Hall
1565 First St.
Sarasota, FL 32436
9
May 31, 2012, 6:00 p.m.
Ft. Myers
School Board of Lee County
Board Room
Lee County Education Center
2855 Colonial Blvd.
Ft. Myers, FL 33966
June 12,2012, 4:00 p.m.
Daytona
Sunset Harbor Yacht Club and Conference Center
861 Ballough Road
Daytona Beach, FL 32114
June 13,2012, 4:00 p.m.
Melbourne
Brevard County Government Center Commission
Room, Building C, 1st Floor
2725 Judge Fran Jamieson Way
Melbourne, FL 32940
June 14, 2012, 4:00 p.m.
West Palm Beach
Solid Waste Authority of Palm Beach County
Auditorium
7501 North Jog Road
West Palm Beach, FL 33412
June 26,2012, 9:00 a.m.
Miami
Miami-Dade County Auditorium
2901 W. Flagler St.
Miami, FL 33135
June 26, 2012, 4:00 p.m.
Miami Gardens
Florida Memorial University
Lou Rawls Auditorium
15800 N.W. 42nd Avenue
Miami Gardens, FL 33054
10
June 27,2012, 9:00 a.m.
Plantation
Plantation City Council Chambers
400 NW 73 Avenue
Plantation, FL 33317
June 27, 4:00 p.m.
Ft. Lauderdale
Broward County Main Library Auditorium
100 S. Andrews Ave.
Ft. Lauderdale, FL 33301
Pre-Hearing Conference: August 14, 2012
Florida Public Service Commission
4075 Esplanade Way
Betty Easley Conference Center, Room 148
Tallahassee, FL 32399-0850
Hearing: August 20-24 and August 27-31, 2012
Florida Public Service Commission
4075 Esplanade Way
Betty Easley Conference Center, Room 148
Tallahassee, FL 32399-0850
11
VI. LOCATIONS AT WHICH COMPLETE MFRs ARE AVAILABLE FOR
INSPECTION
1. FPL Juno Beach Headquarters
700 Universe Boulevard
Juno Beach, FL 33048
2. FPL Miami General Office
9250 West Flagler Street
Miami, FL 33174
3. Volusia County Library Center
105 E. Magnolia Avenue
Daytona Beach, FL 32114
4. Brevard County Main Public Library
308 Forrest Avenue
Cocoa, FL 32922
5. Palm Beach County Main Public Library
3650 Summit Blvd.
West Palm Beach, FL 33406
6. Broward County Main Public Library
100 S. Andrews Avenue
Ft. Lauderdale, FL 33301
7. Miami-Dade County Main Public Library
101 W. Flagler Street
Miami, FL 33130
8. Selby Public Library of Sarasota
1331 First Street
Sarasota, FL 34236
9. Lee County Main Public Library
2050 Central Avenue
Ft. Myers, FL 33901
12