NextEra Unit Files for a Rate Hike

NextEra Energy, Inc.’s (NEE - Analyst Report) subsidiary Florida Power & Light Company has filed for a rate increase with Florida Public Service Commission (“FPSC”) to recover investments made by the company for new, high-efficiency natural gas power plants. If approved, the new rates will be effective after January 1, 2013.

Over the last couple of years, NextEra Energy has invested around $2.4 billion for the construction of clean, high-efficiency, combined-cycle natural gas-fired energy power plants in Riviera Beach. These plants will generate electricity by using considerably less fuel. This high-efficiency generation process will ultimately lower customer bills in the long term without compromising on the quality of services.

The company applied for a rate hike to the commission, which will result in an increase of $6.97 per month for an average residential customer using 1,000 kilowatt-hours per month. However, the hike will be marginally offset by $4.49 per month due to lower fuel usage, lower fuel prices and other adjustments. The net increase in the consumer’s bill will be $2.48 per month.

It is a normal practice for the regulated utility companies to recover their invested funds from consumers through rate hikes. NextEra Energy’s previous rate hike for consumers happened in June 2011, as it aimed to develop its electric service offerings, foster economic growth of Florida and expand its business.

Utility providers invest hefty amounts for infrastructural developments, and the implementation of new technologies, which are intended to provide uninterrupted power supply to consumers in the long run. The company has been servicing its consumers in an efficient manner, which is reflected in the year end growth of customer level by 10K. We believe growth in customer base is a positive indicator of the performance level of the company.

We appreciate the steps taken by NextEra Energy for increasing renewable energy generation along with expansion of its wind and solar energy portfolio. The company is a well-managed, high-quality, regulated electric utility provider that serves high-growth areas in Florida. We also expect the company’s earnings growth to come from its high quality electric service, continued investments in Florida’s utility infrastructure, increasing wind and solar investments, and exceptional customer service.

But, at the same time, we are cautious about Florida’s economy and uncertainties associated with NextEra Energy’s commodity-linked generation assets.

NextEra Energy currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

Juno Beach, Florida-based NextEra Energy Inc. is a public utility holding company engaged in the generation, transmission, distribution, and sale of electric energy. The company has both regulated and non-regulated energy-related products and services, with operations in 24 US states and Canada. The company mainly competes with TECO Energy, Inc. (TE - Analyst Report) and Southern Company (SO - Analyst Report).