FPL responds in appeal of rate hike decision, says rates justified

This is a rendering of the proposed Dania Beach Clean Energy Center, which will replace the existing Lauderdale power plant in Florida. Florida Power & Light says the new facility could come online in 2022.

Florida Power & Light’s rate hike of $1.5 billion approved by regulators last year was justified, lawyers for the state’s largest utility argued in a brief filed with the Florida Supreme Court on Wednesday.

The brief urges justices to turn down arguments from a coalition of environmental and other advocacy groups that the Florida Public Service Commission’s decision to approve the rate case violated state laws. Precedent puts the burden of proof on the groups, who are appealing the PSC’s decision, and justices must give deference to the Commission, FPL’s lawyers contend.

“When a Commission order approving a settlement reaches this Court, the standard of review is highly deferential: recognizing the Commission’s expertise and statutory role in fixing fair rates, the Court will affirm the order as long as the Commission did not exceed its broad statutory authority and the order is supported by competent, substantial evidence,” the brief states.

The PSC approved a settlement between FPL and some solar and consumer advocacy groups in October 2021, paving the way for the $1.5 billion in rate hikes to begin being phased in on Jan. 1, 2022.

Florida Rising, Floridians Against Increased Rates, the Environmental Confederation of Southwest Florida and the League of United Latin American Citizens said they weren’t consulted on the settlement and appealed the PSC’s decision to approve the settlement.

“As compared to FPL’s initial request, this ‘compromise’ actually adds billions in new rate-based spending, guarantees FPL years of even higher profits, and crucially, leaves the residential public worse off than if FPL’s original proposal had been approved in full,” lawyers for the groups argued in their initial filing in April.

The groups also contend parts of the settlement agreement allowing FPL to maintain a return on equity — a maximum profit for and utility — of more than 10%, allowing it to automatically recover costs related to named tropical storms and hurricanes and recoup money for a reserve surplus amortization mechanism, or RSAM, which allows it to pay off capital investments over time, are exorbitant and unjustified.

“At its essence, the mechanism is a slush fund, created from thin air by manipulating the remaining service lives of FPL assets to create an artificial surplus, which is then used to guarantee FPL profits at the very top of its authorized ROE range,” the groups allege.

FPL lawyers counter that the RASM is a prudent way to allow it to build up funds that will let it pay for future capital improvements that will benefit customers. The brief cites testimony from Scott Bores, FPL’s senior director of financial planning & analysis, who estimated FPL would make $1.28 billion in capital improvements in 2024 and 2025, which would trigger another rate request in 2023, as opposed to the settlement, which will last for four years.