The Florida Public Service Commission's recent decision to continue allowing Florida Power & Light Co. to use tax savings to cover $1.3 billion in costs related to Hurricane Irma is a credit positive for the NextEra Energy Inc. subsidiary, according to Moody's.
On May 14, the Florida PSC determined that FPL's replenishing of a company account used for storm restoration costs with savings that resulted from the lower corporate tax rate from the tax reform signed 2017 was in line with its 2016 rate case settlement. The vote affirmed FPL's decision following a petition that an intervenor group, led by the State of Florida Office of Public Counsel, filed with regulators in December 2018. The group argued that the utility should not use a reserve amortization mechanism for storm cost recovery and that it should refund customers up to $736.8 million yearly due to tax reform.
Jeffrey Cassella, Moody's vice president and senior credit officer, wrote in a May 17 note that the vote represented a credit positive for FPL because it helps the utility have stable cash flows and reinforces certainty provided by the 2016 rate settlement. With the decision, FPL can keep excess tax-reform savings after replenishing its storm reserve account as long as the utility does not earn above the upper end of the range of 11.6% on its allowed return on equity based on FPL's equity ratio of about 60%.
"Because of this decision, FPL may be able to file its next general rate case one to two years later than 2020, which was the date it originally intended," Cassella wrote.
Recent strong storms such as Hurricane Irma have tested Florida investor-owned utilities' restoration efforts and diminished their storm reserve accounts to cover related costs. The PSC recently approved FPL corporate affiliate Gulf Power Co.'s request to charge an additional $8 on monthly residential customers bills to recover $342 million in costs associated with Hurricane Michael and to replenish the company's storm reserve.