Summary
NextEra Energy Inc. (NEE) announced via an 8-K filing on December 13, 2012, that its subsidiary, Florida Power & Light Company (FPL), has reached a settlement agreement with intervenors in its base rate proceeding. This agreement, approved by the Florida Public Service Commission (FPSC) on December 12, 2012, will govern FPL's retail rates from January 2013 through December 2016. The key takeaway for investors is the approved increase in FPL's retail base revenues by $350 million annually, effective January 2013. This, combined with the defined regulatory return on common equity (ROE) of 10.50% (with a band of 9.50% to 11.50%), provides a clearer earnings framework for FPL over the next four years. The agreement also outlines mechanisms for recovering costs related to modernization projects and future storm restoration, offering predictability in managing operational expenses and potential weather-related impacts.
Key Highlights
- 1FPL's base rate proceeding settled with intervenors and approved by the FPSC.
- 2Effective period for the new rate agreement is January 2013 through December 2016.
- 3Annual increase in FPL's retail base revenues of $350 million commencing January 2013.
- 4Allowed regulatory return on common equity (ROE) set at 10.50%, with a performance band of 9.50% to 11.50%.
- 5FPL can seek rate relief if earned ROE falls below 9.50%; other parties can seek review if ROE exceeds 11.50%.
- 6Retail base rates will increase to reflect costs of three modernization projects as they become operational.
- 7Mechanisms for amortizing up to $400 million of surplus depreciation and fossil dismantlement reserves are outlined, subject to ROE constraints.
- 8Storm restoration costs will be recoverable on an interim basis, capped initially by a surcharge on residential bills, with provisions for higher costs.