With rising fuel cost projections for 2014, NextEra Energy Inc.’s (NEE - Analyst Report) business wing, Florida Light & Power announced that electric rates might increase in Jan 2014. The company released its estimates in conjunction with the electric utility’s annual filing with the Florida Service Commission.
NextEra Energy intends to file the bill projections with the Public Service Commission ("PSC") in fall and expects to be completed by early Dec 2013. Besides the fuel cost increase, the expected bill includes estimated costs for purchased power, completed nuclear upgrades, energy conservation programs, nuclear development, environmental compliance and other non-fuel components of electric service. The bill doesn’t include any expenses related to the proposed natural gas pipeline system.
Fuel prices are determined through the balancing forces of demand and supply in the international market. The fuel charge in the customer bill reflects the real fuel cost that the company incurs for purchase to generate electricity.
A typical residential customer consuming 1,000 Kilowatt-hour (kWh) will witness a 5% rise in its bill which translates to 17 cents a day. NextEra Energy is currently busy with its multi-year modernization plan involving replacement of older oil-fired units with efficient and clean burning natural gas. This has enabled the company to counter spiraling prices and allowed customer cost-savings of over $6 billion since 2001 by generating more power from cheaper fuel usage.
The latest forecast will not raise an alarm among customers in spite of the increase; bill charges of $100 will still be lower than other utility rates and also from the state and national average range of $124 to $126. NextEra Energy is known for its cheap and reliable utility services. In 2013, the company’s 1,000-kWh fuel charge was at the lowest level in a decade.
Besides NextEra Energy, Duke Energy Corp. (DUK - Analyst Report) also filed an application for fuel cost recovery with the Florida PSC which called for a bill increase of 7% to $8.24 per month.
The final decision is uncertain given the high volatility in natural gas prices. Nonetheless, NextEra Energy’s continued investments in infrastructure modernization along with cost management efforts will help the company to dominate the Florida market. The company has been recording consistent customer growth from 2012 levels.
Currently, NextEra Energy carries a Zacks Rank #3 (Hold). Other well-placed utility counterparts are Zacks Ranked #2 (Buy) UNS Energy Corp. and Alliant Energy Corp. (LNT - Analyst Report).