JUNO BEACH, Fla. – Florida Power & Light Company announced today that beginning January 2007, FPL residential customers could see an approximate two percent decrease in electric rates, if fuel costs don’t rise beyond current forecasts.
FPL filed its 2007 fuel cost forecast with the PSC today, based on current fuel forecast data. The Florida Public Service Commission will hold a hearing to review the company’s request for rate adjustments in November. Although FPL’s fuel costs are expected to be somewhat higher in 2007, the company said that several factors lead to the proposed reduction of a residential 1,000 kilowatt hour (kWh) bill from $108.61 to $106.68, including:
- Increased fuel efficiency of FPL power plant fleet. To meet the continued growth in Florida and ensure continued adequate power supply, FPL expects to begin operation of a new state-of-the-art natural gas-fired plant (Turkey Point 5, located at its Turkey Point plant site in Miami-Dade County) in May 2007. In accordance with its current rate agreement approved by the PSC, FPL will seek an adjustment to its base rate to reflect this new plant addition. This base rate adjustment will be offset by the increased fuel efficiency the new plant will bring to the FPL fleet and the reduction of power purchased from other companies’ less efficient power plants. The addition of Turkey Point 5, a highly efficient combined cycle unit will result in approximately $96.4 million in fuel savings – which will be passed to FPL customers from May to December of 2007. FPL’s non-nuclear power plant fleet is the top performing fleet of its size in the nation and has become 12 percent more efficient the past five years.
- Lower 2006 fuel costs than earlier forecast. The amount of FPL’s fuel charge in 2006 was set by the PSC last fall to cover anticipated fuel costs in 2006 of $5.8 billion as well as an under-recovery of approximately $770 million of fuel costs from 2005. An additional $307 million under-recovery from 2005 was expected to be recovered in 2007. Because of lower fuel prices due largely to milder weather throughout the U.S. this year, FPL expects its 2006 fuel costs to be six percent less than forecast. An anticipated over-recovery will allow the 2005 carry over to 2007 to be reduced to $77 million. FPL expects its 2007 fuel costs to be $6.37 billion, exclusive of the 2005 under-recovery.
- A reduction of the storm restoration charge. By the end of 2006, FPL expects to complete the issuance of bonds (or securitization) to cover the storm reserve deficit created in 2004 and 2005. With securitization, it is expected that the storm charge will be reduced from $1.65 per 1,000 kWh to $1.10 per 1,000 kWh. This means that the storm restoration charge could be approximately one percent of the total bill. This is a preliminary estimate; the actual securitization charge will be based on market conditions at the time the storm recovery bonds are issued.
“We share our customers’ concerns regarding fuel prices and we are very aware of how the price of fuel has had an impact on a family’s budget,” said Armando Olivera, president of FPL. “We remain committed to doing everything we can to continue to provide our customers with the highest service reliability at the lowest price possible.”
The company has decreased its base rates by 15 percent since 1999; however fuel charges to customers during that time have increased by 200 percent. Volatility in the world fuel markets, rising global demand for fuels and the damage wrought by Hurricane Katrina had a significant impact on 2005 fuel costs causing FPL’s $1 billion under-recovery that year. FPL makes no profit on the fuel charge or the storm charge, and only actual costs are passed on to customers. Since 1975, Florida electric utilities have adjusted their fuel clause at least annually and, with PSC approval, “true-up” the charge so customers pay only the actual costs for fuel.
“Experience has taught us that extreme weather, political unrest and global demand for fuel can create big swings in fuel prices,” said Olivera. “While any combination of these uncontrollable factors can impact the price of the fuel we use at our power plants to generate electricity, we remain optimistic that we can maintain the electric rates we have filed in our fuel forecast today.”
The 200 percent increase in fuel charges on customer bills since 1999 would be substantially higher, but FPL has been able to hold down the costs of fuel passed on to its customers by maintaining a diverse portfolio of generation sources, including nuclear, oil, natural gas, coal and power purchased from other utilities. To minimize the use of higher-priced natural gas, FPL is capable of burning both oil and natural gas at many of its plants, which gives it the ability to use the least expensive fuel source to generate electricity.
Energy management programs - initiatives that help reduce the overall load on the electric grid during periods of high usage also help relieve fuel costs. FPL customer participation equaled six percent of the entire U.S. electric utility load reduction effort, its customer participation in energy conservation programs represents 13 percent of the entire U.S. electric utility conservation effort and among all utilities in the US, FPL is rated #1 by the US Dept. of Energy in conservation programs.