Florida Power & Light Company (FPL), a subsidiary of NextEra Energy Inc. (NEE - Analyst Report) , will increase the monthly rates for its residential customers based on the rate proposal, which Florida Public Service Commission (“FPSC”) is currently reviewing and considering.
The commission is expected to provide a proposed settlement agreement on December 13, 2012. There are two possibilities – firstly, if the commission approves the rate in December 2013, then the base rates would increase $4.10 from $43.26 in January 2012 to $47.36 and the fuel charges would decline from $51.36 to $47.23. Overall, this would bring the total bill amount to $94.59, down 3 cents per month from $94.62 in January 2012 for a residential customer using 1,000 kilowatt hours. This would keep the bill approximately flat with the current rate.
Secondly, the base rates, if approved, would increase $1.74 in June, 2013 and $2 each in 2014 and 2016. However, taking into account the reductions in fuel and other costs, the total bill would only increase by 94 cents to $95.56 as of June 2016.
However, if the commission does not approve the bill till December, under the original proposal, the base rates would increase by $5.23 from $43.26 to $48.49 and Fuel & other charges would decline from $51.36 to $47.58. Overall, this would bring the total bill amount to $96.08, up 5 cents per day from $94.62 in January 2012 for a residential customer using 1,000 kilowatt hours. This would increase the rate to $1.45 per month.
If not approved, the base rates would increase $1.86 in June 2013, resulting in a total rise of $7.09 in 2013. Taking into account other adjustments, net increase as of June 2013 would be $2.54 that would bring the total bill amount to $97.16 in June 2013. In this case, the company would intend to file new cases if it wants additional base rate increases after 2013.
If the commission does not approve the settlement agreement in December 2012 and later approves a base rate that is lower than the amount implemented in January 2013, the company would refund the difference with interest to its customers.
Also if the rates are not approved in December 2012, it would result in a huge decline in the company's finances and liquidity position as the company’s ability to offset expenses by the use of non-cash surplus depreciation is very limited in 2013 and will also expire very soon.
Cash and cash equivalents as of September 30, 2012, were $246 million, down from $377 million as of December 31, 2011. Long-term debts of the company as of September 30, 2012, were $22.7 billion versus $20.8 billion as of December 31, 2011.
NextEra Energy is a frontrunner in the U.S. utility industry providing efficient power and energy services across various states. The company is committed toward maintaining solid financials and favorable credit ratings. The approval of rates would provide the state with lowest electric bills for at least four more years. Going forward, increase in base rates balanced by decline in fuel charges would keep the company as well as the customers contented.
However, we remain concerned about the commodity price sensitivities and possibility of negative outcome for the new proposed rate settlement case.
Like its peers, American Electric Power Co. Inc. (AEP - Analyst Report) and PG&E Corp. (PCG - Analyst Report) , the company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.
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.