Florida Power & Light closes in on acquisition of Vero Beach utility

Dive Brief:

The Florida Public Service Commission on Tuesday voted unanimously to terminate a territorial agreement between Florida Power & Light (FPL) and Vero Beach, a final step that allows the investor-owned utility to purchase the city's municipal electric company.
The deal has been almost a decade in the making, and is expected to result in significantly lower bills for Vero Beach customers as they become subject to FPL's lower rates. By the end of this year, FPL will complete its purchase of the city's electric utility assets and operations for $185 million.
Regulators also approved a $114 million acquisition adjustment, which recognizes the utility's investment above the value of assets it acquired. That adjustment could be passed along to customers when FPL files for new rates, which are currently set under a settlement that expires in 2020.

Dive Insight:

Vero Beach customers are expected to see a significant drop in monthly bills — more than 21% — once the city's system has been integrated with FPL's own grid. The steep bill reduction illustrates why Vero Beach approached FPL in 2009 about a possible deal, and why the city has pursued it for almost 10 years.

FPL must charge Vero Beach customers the same rates it charges its existing customers, which means the new residential customers will see monthly bills drop from $126.10 to $99.37, according to the PSC.

Over the summer, the PSC approved petitions for FPL to charge Vero Beach electric customers and to approve its requested accounting treatment. While the commission does not have direct authority over the acquisition, it does oversee changes in service territories and rates.

"Today's decision resolves years of litigation, and I am confident it is in the public interest," Commissioner Gary Clark said in a statement.

The benefits come down to scale: Vero Beach has approximately 35,000 residential, commercial and industrial customers, while FPL serves 4.9 million across the state.

Vero Beach customers will see rates ultimately drop 21.2% and FPL says its customers will see long-term savings of more than $100 million. The utility previously told regulators that incremental revenues from the new customers will be greater than the incremental cost of serving them. And the growth in FPL's customer base will lower the shared amount of fixed costs that show up on monthly bills.

In 2016, the PSC approved a four-year settlement that set FPL's rates and authorized investment in new technologies that help reduce and shorten outages, generate power more efficiently and curtail fuel consumption and air emissions. That settlement expires in 2020, at which point FPL could file new rates that included the $114 million acquisition adjustment.

Staff of the PSC previously concluded the adjustment would have minimal impacts on FPL rates.