PSC Approves Negotiated Rate Settlement That Balances Interests of Customers and FPL

Business Wire, August 24, 2005

JUNO BEACH, Fla. -- Florida Power & Light Company, the principal subsidiary of FPL Group, Inc. (NYSE:FPL), today said that the Florida Public Service Commission has approved a settlement agreement on FPL's 2006 base rate increase request that ensures that electric base rates for FPL customers will not increase through 2006. The new base rate agreement will go into effect Jan. 1, 2006 and will remain in effect at least through 2009. It includes a provision for extension of the agreement for subsequent years.

The negotiated agreement is patterned after two previous revenue-sharing agreements incorporating base rate reductions and a revenue sharing refund mechanism that have saved customers a total of approximately $4 billion since 1999. Like the current agreement, it features a refund to customers if FPL's total annual revenues increase above certain threshold levels. Refunds from the past agreements have totaled $225 million of the $4 billion in total savings.

"We are pleased we reached a reasonable agreement that continues our goal of providing our customers with reliable and cost-effective electricity, while at the same time providing them with rate stability," said FPL President Armando Olivera. "This agreement fairly balances the interests of our customers and the company."

Provisions of the agreement are designed to enable FPL to continue to provide reliable electric service to an ever-growing customer base in Florida. For example, as a result of a generation adjustment provision of the agreement, FPL will be permitted to recover prudent costs incurred in building new power plant projects in the years ahead subject to PSC review and approval such as in mid-2007 when FPL's Turkey Point Unit 5 goes into commercial service.

In seeking its first base rate increase since 1985, FPL followed a regulatory process as outlined by the PSC. The formal rate case proceeding began in January with the company announcing its intent to pursue a $430 million increase in base rates to go into place at the expiration of the current agreement on Dec. 31, 2005.

Over the ensuing months, FPL submitted more than 315,000 pages of documents and testimony to support its need for the increase. These documents were reviewed by PSC staff and all interested parties. In addition, parties in the docket had the opportunity to also receive specific documents and responses to questions. Public hearings were held in six cities in FPL's service area at which customers were given the opportunity to offer support or address concerns. This process, which culminated in the negotiated agreement, ultimately made it possible for all parties to enter negotiations with a thorough knowledge of the facts of the request readily available. Barring a successful negotiation, the company was fully prepared to move forward with the technical hearing and subsequent phases of the proceeding.

Interested parties in the rate review who joined in the agreement are the Attorney General's Office, Office of the Public Counsel, Florida Industrial Power Users Group, Florida Retail Federation, AARP, South Florida Hospital & Healthcare Association, The Commercial Group, Federal Executive Agencies and Common Cause Florida.

"Our past agreements successfully framed the discussions and led to the balancing of the often competing interests that can prevail in negotiations," said Olivera. "We recognize and appreciate the hard work of everyone involved in these proceedings that led to a flexible and reasonable settlement that is in the best interest of our customers and recognizes the challenges faced by FPL in the future."

Highlights of the Agreement:

--No base rate increase - Overall, FPL customers will see no increase in the base rate portion of their bills in 2006. In fact, by changing the two-tiered residential rate structure, many customers will see lower base rates than those in place today.

--Effective date - The new agreement is effective Jan. 1, 2006, and will continue through 2009 with a provision for extension in subsequent years.

--Revenue sharing - Like the current agreement, customers will receive refunds if revenues exceed certain threshold levels based on a ten year average growth in kilowatt-hour sales. Since 1999, customers have received refunds totaling $225 million through this revenue sharing incentive. Revenue sharing is the appropriate method of addressing earnings levels, but an 11.75 percent ROE shall be used for all other regulatory purposes.

--RTO - FPL will be allowed to recover through a clause any costs associated with complying with a PSC order regarding a regional transmission organization (RTO), such as GridFlorida, or alternatives to it.

--Storm reserve - FPL will have the ability to recover prudently incurred storm restoration costs through securitization or surcharges. FPL will suspend its annual accrual to its storm reserve.

--Depreciation credit - The agreement continues an annual depreciation credit of $125 million.

--Decommissioning accruals - FPL will suspend contributions to its nuclear decommissioning fund for a minimum of four years.