HomeMy WebLinkAboutSubmittal - Article Submitted by Mayor Cindy LernerFPL doesn't need rate hike - 07/26/2012 I MiamiHerald.com
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Posted on Thu, Jul. 26, 2012
FPL doesn't need rate hike
BY RICK MCALLISTER
www.frf. org/
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Customers of Florida Power & Light Company should take advantage of the upcoming
opportunity to make their voices heard on the company's request for higher electricity
rates. The have a chance to make a direct impact on lowering electricity rates by attending
the Public Service Commission's hearings on Aug. 7 and 8 in Miami -Dade and Broward
counties.
The Florida Retail Federation is representing utility customers opposing the increase, and
we do not believe a $690 million rate hike for FPL is necessary. The current base rates will
allow FPL to continue providing the safe and reliable service we have come to expect, and
will allow customers to benefit from any reduction in fuel costs.
Because FPL is entitled to recover its fuel costs dollar -for -dollar through its "fuel charge,"
any reduction in fuel costs must be passed back to customers. So, if the PSC were to deny
the requested base rate hike, customer bills would go down by the amount of the lower
fuel costs. Fuel costs go up and down, but a base rate increase is very likely forever.
The company argues that its average bills have been decreasing in recent years. They
have been going down, and that's good. In fact, we think rates could be even lower.
According to its own filings, FPL's present rates, without any increases, give the company
at least $10.4 billion a year in revenue, even assuming a pessimistic sales outlook. That
estimate includes about $1.2 billion in profit, which is one of the key issues at stake in the
rate case.
During these hearings, the term that ratepaying customers should be paying particular
attention to is "return on equity," which is another way of saying profit. FPL is seeking an
"adjustment" to its return on equity. This adjustment is, in fact, a request for a substantial
increase in the percentage of profit FPL is allowed to take from its captive customers.
We believe that FPL is asking for an excessive profit — 11.5 percent after taxes, which is
about 18.7 percent before taxes. Allowing FPL an after-tax return of 9 percent is more than
enough, and probably generous considering it is a monopoly provider of electricity. By
maintaining FPL's return on equity at a reasonable 9 percent, we would reduce the
requested increase by nearly half, about $340 million a year.
Of course, FPL will make even more money if it sells more electricity. In Florida, most
other utilities are expecting their sales to go up. In contrast, FPL has based part of its
requested rate hike on projections that it will sell less electricity in 2013 than in 2011.
IZ-007214 - Arir.le Submitted lad Mayor Mundy Leknvr
http://www.miamiherald.com/2012/07/26/v-print/2914723/fpl-doesnt-need-rate-hike.htm1 7/27/2012