Florida Power & Light is having to do a delicate balancingact to minimize the impact of high gas and oil prices onresidential customers.

In an attempt to mitigate costs of oil and gas used for powergeneration, which have risen 168% and 70%, respectively, sinceJanuary 1999, FPL plans to spread its unrecovered fuel costs overtwo years rather than one, use a refund from a revenue sharingprovision and put off the recovery of a buyout of above marketpower purchase agreements.

It still plans to raise its residential rates by 8.7% inresponse to high wholesale prices. It submitted a rate plan to theFlorida Public Service Commission Friday. A special refund tocustomers next June from a revenue sharing provision of FPL’sthree-year, $1 billion rate reduction agreement will partiallyoffset the fuel cost increase. A 1,000 kWh residential bill forcomparison would rise from $74.12 today to $80.55 during 2001.

“Our plan includes spreading $518 million in unrecovered fuelexpenses over a two-year period, rather than the typical one-yeartimeframe. This way, we are able to ease some of the impact ofthese extraordinary increases in fuel costs on our customers,” saidPaul Evanson, FPL president. “Certainly no one could have predictedhow high oil and natural gas prices would climb — or how longthey would remain at these levels. But we can in part creditefficient operation of our power plants and diversity in our fossiland nuclear generation with helping to protect our customers fromeven higher electricity prices.”

The cost of oil has more than doubled since the first quarter of1999 and has not been this high since the Gulf War in 1990. Abarrel of oil (42 gallons) for electric generation in January 1999cost FPL $10.61, compared with FPL’s price at the end of August of$28.40 — a 168% increase in 19 months. Market prices are evenhigher. The price FPL has paid for natural gas also has risenunabated, climbing 70% since January 1999 ($2.67 to $4.55/MMBtu atthe end of August). Market prices for natural gas have reached$5.26 and with the onset of winter may climb further as demand forheating fuel in other areas of the country increases.

As a further effort to lessen the impact of clause adjustmentson customer bills, FPL has asked the PSC to spread the cost of a$222.5 million buyout of purchased power contracts with two PalmBeach county power plants over five years and delay the start ofrecovery from customers until 2002.

“On a positive note, our customers can expect to receive arefund on their bills this coming June resulting from a revenuesharing provision in our April 1999 three-year, $1 billion ratereduction agreement reached with the PSC and the Office of PublicCounsel,” Evanson said. That refund — expected to be between $75and 100 million — will amount to a one-time credit of $12 on a1,000 kilowatt-hour bill. Because of their much higher electricityuse, commercial and industrial customers will receive $13,000 and$70,000, respectively. FPL serves 3.8 million customer accounts inFlorida.

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