NextEra Energy Inc. (NEE)’s flagship utility Florida Power & Light won state approval today for a $350 million electricity rate increase and above-average return on equity after last-minute concessions to regulators.
A revised agreement between NextEra, based in Juno Beach, Florida, and groups representing large business and government customers was approved by unanimous vote of Florida Public Service Commissioners meeting in Tallahassee. It sets rates for the next four years for Florida Power’s 4.6 million homes and businesses, the most in the state.
Florida Power will be allowed a 10.5 percent return on equity, up from 10 percent under rates that expire at year-end, Cynthia Muir, a spokeswoman for the commission, said in a telephone interview following the vote.
That compares with a 9.78 percent average return on equity granted U.S. electric utilities in the third quarter, according to the Edison Electric Institute. Both the original deal, which called for a 10.7 percent return on equity, and the revision were opposed by the Office of Public Counsel, the state’s official advocate for utility customers.
“We regard approval of the revised settlement as a significant positive,” Michael Worms, a New York-based analyst for BMO Capital who rates the shares “outperform,” equivalent to a buy, and owns none, wrote today in a note to clients. “The public interest has been met.”
The initial agreement was a “windfall to shareholders,” the Public Counsel said in a filing. Hour-long talks today weren’t fair or reasonable, a spokesman for the office told commissioners today.
Florida Power had said in a Nov. 21 statement that absent an approved rate plan it would raise the typical January household bill by $1.45 from a year earlier using a state law that allows utilities to bill at unapproved rates subject to refund.
Typical household bills in January will be 37 cents lower than a year earlier as a result of the decision because of declines in fuel costs and other items not included in basic rates, Mark Bubriski, Florida Power spokesman, said today in a phone interview. Typical bills will rise less than $1 a month in June 2013 when a new power plant comes into service, Florida Power said in a statement.
Bills for businesses will range from unchanged to 3 percent lower, Bubriski said.
Today’s settlement allows the utility to collect an additional $350 million in basic rates for delivering electricity, down from $378 million provided in the proposed Aug. 15 settlement.
NextEra rose 1.2 percent to $70.05 today in New York. The shares have risen 15 percent this year.
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