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Final hearings on FPL’s proposed rate hike begin

FPL rate hike
FPL will defend profit margin and executive pay
By Julie Patel, South Florida Sun Sentinel


State regulators are expected to grill Florida Power & Light officials today about the utility’s profit margin and executive pay in the first of two final hearings on FPL’s proposal to boost annual base rates by $1.3 billion.

The Public Service Commission hearings, today and Thursday in Tallahassee, will give FPL officials a chance to defend the utility in the face of criticism of its rate hike before the commission votes on the proposal and the company’s revenue needs on Oct. 28 and Nov. 13.

The PSC’S first 10 hearings on the FPL proposal in late August and early September were overshadowed by ethical issues raised about the relationship between utility and commission employees. On Tuesday, commissioners discussed proposals for new ethics guidelines at a meeting in Tallahassee.

Gov. Charlie Crist told reporters at a press conference in Tallahassee Tuesday that he likes the idea of electing rather than appointing commissioners to make them more accountable. But he said no major changes may be needed "if they vote right" on FPL’s proposal.

If the rate increase is approved, monthly household electric bills could rise by as much as $12.40 per month for the first 1,000 kilowatt hours used. That’s slightly less than the electricity used by the average South Florida household. But FPL officials project that a decrease in fuel costs will reduce the typical bill by $7 next year even if the base rate increase is approved. They say the need the increase to make the grid stronger and more efficient.

The parts of FPL’s request that have drawn the most fire are ones that would bump up rates the most. Those include:

Profit margin: FPL’s requested 12.5 percent profit margin on what shareholders invest is higher than the 10.5 percent average margin approved last year for any of the 37 other major electric utilities across the country that were up for review, according to a PSC report this year.

Executive pay: FPL customers’ base rates include more than $84 million for its top 368 earners. FPL President Armando Olivera said most employees would get pay increases under the base rate proposal and they’re needed to retain qualified workers.

Depreciation: Representatives from the Office of Public Counsel say FPL charged $2.75 billion more than needed from customers for equipment depreciation. FPL officials’ estimate is closer to $1.25 billion and they propose returning the money to customers over about 20 years while the office recommends returning it the next few years.

Automatic power plant approval: When FPL agreed to freeze base rates in 2005, state officials approved allowing FPL to pass costs to customers of new power plants with less regulator scrutiny. FPL has proposed continuing the provision to allow it to recover the $182 million annual cost of a new natural gas generator at a power plant in western Palm Beach County.

"Only the actual final costs are built into rates," FPL spokesman Mark Bubriski said.

Staff Writer Josh Hafenbrack contributed to this report. Julie Patel can be reached at 954-356-4667 and

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