Based on investments in capital improvements and the other drivers listed FPL’s above and accounting for the adjustments identified by FPL (see Exhibit KO-20), the total resulting base revenue deficiency in 2017 is $826 million. Absent rate relief, the resulting adjusted jurisdictional rate of return on average rate base is projected to be 8.05%. 2018 Subsequent Year Adjustment retail rate base is projected to increase by approximately $1.3 billion from FPL’s 2017 to 2018. Even if the Commission grants 2017 Base Rate Increase in FPL’s full, 2018 ROE is expected to drop more than 100 basis points absent the FPL’s 2018 SYA, putting it below the bottom of the authorized ROE range. FPL’s proposed 2018 SYA reflects the increase in revenue requirements from 2017 to 2018. The primary drivers of this increase are: 1. Continued investments in infrastructure that $223 million provide long-term economic benefits to customers, and ensure regulatory compliance 2. Inflation and customer growth $47 million 3. Change in the weighted average cost of capital $31 million 4. Revenue growth that partially offsets the ($39 million) growth in base revenue requirements; Accounting for the adjustments identified in Exhibit KO-20, resulting base FPL’s revenue deficiency for 2018 is $270 million. Without an increase in revenue requirements in 2018, earned ROE is projected to fall by approximately FPL’s 100 bps (compared with 2017), to below the bottom of the authorized ROE range. With no rate increase in 2017 or 2018, ROE in 2018 is projected to be FPL’s 7.11%, substantially below an appropriate return. Okeechobee Limited Scope Adjustment FPL requests approval of its 2019 Okeechobee LSA in the amount of $209 million for the revenue requirements associated with the first twelve months of the Okeechobee commercial operation, which adjustment would be Unit’s effective on the commercial in-service date. FPL will synchronize revenues and savings by requesting that its fuel cost recovery factors be reduced at the same time as the base rate increase to reflect the fuel savings resulting from the efficient technology. facility’s Return on Equity and Capital Structure One important aspect of strategy is the maintenance of strong financial FPL’s policies to support the execution of its capital programs, to manage its liquidity
Based on FPL’s investments in capital improvements and the other drivers listed above and accounting for the adjustments identified by FPL (see Exhibit KO-20), the total resulting base revenue deficiency in 2017 is $826 million. Absent rate relief, the resulting adjusted jurisdictional rate of return on average rate base is projected to be 8.05%. 2018 Subsequent Year Adjustment FPL’s retail rate base is projected to increase by approximately $1.3 billion from 2017 to 2018. Even if the Commission grants FPL’s 2017 Base Rate Increase in full, FPL’s 2018 ROE is expected to drop more than 100 basis points absent the 2018 SYA, putting it below the bottom of the authorized ROE range. FPL’s proposed 2018 SYA reflects the increase in revenue requirements from 2017 to 2018. The primary drivers of this increase are: 1. Continued investments in infrastructure that provide long-term economic benefits to customers, and ensure regulatory compliance $223 million 2. Inflation and customer growth $47 million 3. Change in the weighted average cost of capital $31 million 4. Revenue growth that partially offsets the growth in base revenue requirements; ($39 million) Accounting for the adjustments identified in Exhibit KO-20, FPL’s resulting base revenue deficiency for 2018 is $270 million. Without an increase in revenue requirements in 2018, FPL’s earned ROE is projected to fall by approximately 100 bps (compared with 2017), to below the bottom of the authorized ROE range. With no rate increase in 2017 or 2018, FPL’s ROE in 2018 is projected to be 7.11%, substantially below an appropriate return. Okeechobee Limited Scope Adjustment FPL requests approval of its 2019 Okeechobee LSA in the amount of $209 million for the revenue requirements associated with the first twelve months of the Okeechobee Unit’s commercial operation, which adjustment would be effective on the commercial in-service date. FPL will synchronize revenues and savings by requesting that its fuel cost recovery factors be reduced at the same time as the base rate increase to reflect the fuel savings resulting from the facility’s efficient technology. Return on Equity and Capital Structure One important aspect of FPL’s strategy is the maintenance of strong financial policies to support the execution of its capital programs, to manage its liquidity
06885-2016_16-0341.ord.docx