Item 8.01 Other Events
On October 26, 2021, the Florida Public Service Commission (FPSC) voted to
approve a stipulation and settlement between Florida Power & Light Company (FPL)
and several intervenors in FPL's base rate proceeding (2021 rate agreement),
which resolves all matters in FPL's base rate proceeding.
Key elements of the 2021 rate agreement, which will be effective from January
2022 through at least December 2025, include the following:
•New retail base rates and charges will be established for the combined utility
system (including the former Gulf Power Company service area) resulting in the
following increases in annualized retail base revenues:
•$692 million beginning January 1, 2022, and
•$560 million beginning January 1, 2023.
•In addition, FPL will be eligible to receive, subject to conditions specified
in the 2021 rate agreement, base rate increases associated with the addition of
up to 894 megawatts (MW) annually of new solar generation (through a Solar Base
Rate Adjustment (SoBRA) mechanism) in each of 2024 and 2025, and may carry
forward any unused MW in 2024 to 2025. FPL has agreed to an installed cost cap
of $1,250 per kilowatt and will be required to demonstrate that these proposed
solar facilities are cost effective.
•FPL's authorized regulatory return on common equity (regulatory ROE) will be
10.60%, with a range of 9.70% to 11.70%. If FPL's earned regulatory ROE falls
below 9.70%, FPL may seek retail base rate relief. If the earned regulatory ROE
rises above 11.70%, any party with standing may seek a review of FPL's retail
base rates. If the average 30-year U.S. Treasury rate is 2.49% or greater over a
consecutive six-month period, the authorized regulatory ROE will increase to
10.80% with a range of 9.80% to 11.80%. If triggered, the increase in the
authorized regulatory ROE will not result in an incremental general base rate
increase, but will apply for all other regulatory purposes, including the SoBRA
mechanism.
•Subject to certain conditions, FPL may amortize, over the term of the 2021 rate
agreement, up to $1.45 billion of depreciation reserve surplus, provided that in
any year of the 2021 rate agreement FPL must amortize at least enough reserve
amount to maintain its minimum authorized regulatory ROE and also may not
amortize any reserve amount that would result in an earned regulatory ROE in
excess of its maximum authorized regulatory ROE. FPL is limited to the
amortization of $200 million of depreciation reserve surplus during the first
year of the 2021 rate agreement.
•FPL will be authorized to expand SolarTogether™, a voluntary community solar
program that gives FPL electric customers an opportunity to participate directly
in the expansion of solar energy and receive credits on their related monthly
customer bill, by constructing an additional 1,788 MW of solar generation from
2022 through 2025, such that the total capacity of SolarTogether™ would be 3,278
MW.
•Future storm restoration costs would continue to be recoverable on an interim
basis beginning 60 days from the filing of a cost recovery petition, but capped
at an amount that produces a surcharge of no more than $4 for every 1,000
kilowatt-hour of usage on residential bills during the first 12 months of cost
recovery. Any additional costs would be eligible for recovery in subsequent
years. If storm restoration costs exceed $800 million in any given calendar
year, FPL may request an increase to the $4 surcharge.
•If federal or state permanent corporate income tax changes become effective
during the term of the 2021 rate agreement, FPL will be able to prospectively
adjust base rates after a review by the FPSC.
The FPSC is expected to issue its order on or before November 15, 2021,
reflecting its decision to approve the 2021 rate agreement. Parties to the base
rate proceeding who opposed the approval of the 2021 rate agreement will have
the right to appeal the FPSC's decision within 30 days of the issuance of the
final order.
Cautionary Statements and Risk Factors That May Affect Future Results
This Form 8-K contains "forward-looking statements" within the meaning of the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are not statements of historical facts, but instead
represent the current expectations of NextEra Energy, Inc. (NextEra Energy) and
FPL regarding future operating results and other future events, many of which,
by their nature, are inherently uncertain and outside of NextEra Energy's and
FPL's control. Forward-looking statements include, among others, statements
concerning the effects of the 2021 rate agreement. In some cases, you can
identify the forward-looking statements by words or phrases such as "will," "may
result," "expect," "anticipate," "believe," "intend," "plan," "seek,"
"potential," "projection," "forecast," "predict," "goals," "target," "outlook,"
"should," "would" or similar words or expressions. You should not place undue
reliance on these forward-looking statements, which are not a guarantee of
future performance. The future results of NextEra Energy and FPL and their
business and financial condition are subject to risks and uncertainties that
could cause their actual results to differ materially from those expressed or
implied in the forward-looking statements, or may require them to limit or
eliminate certain operations. These risks and uncertainties include, but are not
limited to, the following: effects of extensive regulation of NextEra Energy's
and FPL's business operations; inability of NextEra Energy and FPL to recover in
a timely manner any significant amount of costs, a return on certain assets or a
reasonable return on invested capital through base rates, cost recovery clauses,
other regulatory mechanisms or otherwise; impact of political, regulatory and
economic factors on regulatory decisions important to NextEra Energy and FPL;
disallowance of cost recovery by
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FPL based on a finding of imprudent use of derivative instruments; effect of any
reductions or modifications to, or elimination of, governmental incentives or
policies that support utility scale renewable energy projects of NextEra Energy
Resources, LLC and its affiliated entities (NextEra Energy Resources) or the
imposition of additional tax laws, policies or assessments on renewable energy;
impact of new or revised laws, regulations, interpretations or ballot or
regulatory initiatives on NextEra Energy and FPL; capital expenditures,
increased operating costs and various liabilities attributable to environmental
laws, regulations and other standards applicable to NextEra Energy and FPL;
effects on NextEra Energy and FPL of federal or state laws or regulations
mandating new or additional limits on the production of greenhouse gas
emissions; exposure of NextEra Energy and FPL to significant and increasing
compliance costs and substantial monetary penalties and other sanctions as a
result of extensive federal regulation of their operations and businesses;
effect on NextEra Energy and FPL of changes in tax laws, guidance or policies as
well as in judgments and estimates used to determine tax-related asset and
liability amounts; impact on NextEra Energy and FPL of adverse results of
litigation; effect on NextEra Energy and FPL of failure to proceed with projects
under development or inability to complete the construction of (or capital
improvements to) electric generation, transmission and distribution facilities,
gas infrastructure facilities or other facilities on schedule or within budget;
impact on development and operating activities of NextEra Energy and FPL
resulting from risks related to project siting, financing, construction,
permitting, governmental approvals and the negotiation of project development
agreements; risks involved in the operation and maintenance of electric
generation, transmission and distribution facilities, gas infrastructure
facilities, retail gas distribution system in Florida and other facilities;
effect on NextEra Energy and FPL of a lack of growth or slower growth in the
number of customers or in customer usage; impact on NextEra Energy and FPL of
severe weather and other weather conditions; threats of terrorism and
catastrophic events that could result from terrorism, cyberattacks or other
attempts to disrupt NextEra Energy's and FPL's business or the businesses of
third parties; inability to obtain adequate insurance coverage for protection of
NextEra Energy and FPL against significant losses and risk that insurance
coverage does not provide protection against all significant losses; a prolonged
period of low gas and oil prices could impact NextEra Energy Resources' gas
infrastructure business and cause NextEra Energy Resources to delay or cancel
certain gas infrastructure projects and could result in certain projects
becoming impaired; risk to NextEra Energy Resources of increased operating costs
resulting from unfavorable supply costs necessary to provide NextEra Energy
Resources' full energy and capacity requirement services; inability or failure
by NextEra Energy Resources to manage properly or hedge effectively the
commodity risk within its portfolio; effect of reductions in the liquidity of
energy markets on NextEra Energy's ability to manage operational risks;
effectiveness of NextEra Energy's and FPL's risk management tools associated
with their hedging and trading procedures to protect against significant losses,
including the effect of unforeseen price variances from historical behavior;
impact of unavailability or disruption of power transmission or commodity
transportation facilities on sale and delivery of power or natural gas by
NextEra Energy, including FPL; exposure of NextEra Energy and FPL to credit and
performance risk from customers, hedging counterparties and vendors; failure of
NextEra Energy or FPL counterparties to perform under derivative contracts or of
requirement for NextEra Energy or FPL to post margin cash collateral under
derivative contracts; failure or breach of NextEra Energy's or FPL's information
technology systems; risks to NextEra Energy and FPL's retail businesses from
compromise of sensitive customer data; losses from volatility in the market
values of derivative instruments and limited liquidity in over-the-counter
markets; impact of negative publicity; inability of FPL to maintain, negotiate
or renegotiate acceptable franchise agreements with municipalities and counties
in Florida; occurrence of work strikes or stoppages and increasing personnel
costs; NextEra Energy's ability to successfully identify, complete and integrate
acquisitions, including the effect of increased competition for acquisitions;
environmental, health and financial risks associated with NextEra Energy
Resources' and FPL's ownership and operation of nuclear generation facilities;
liability of NextEra Energy and FPL for significant retrospective assessments
and/or retrospective insurance premiums in the event of an incident at certain
nuclear generation facilities; increased operating and capital expenditures
and/or reduced revenues at nuclear generation facilities of NextEra Energy or
FPL resulting from orders or new regulations of the Nuclear Regulatory
Commission; inability to operate any of NextEra Energy Resources' or FPL's owned
nuclear generation units through the end of their respective operating licenses;
effect of disruptions, uncertainty or volatility in the credit and capital
markets or actions by third parties in connection with project-specific or other
financing arrangements on NextEra Energy's and FPL's ability to fund their
liquidity and capital needs and meet their growth objectives; inability of
NextEra Energy, FPL and NextEra Energy Capital Holdings, Inc. to maintain their
current credit ratings; impairment of NextEra Energy's and FPL's liquidity from
inability of credit providers to fund their credit commitments or to maintain
their current credit ratings; poor market performance and other economic factors
that could affect NextEra Energy's defined benefit pension plan's funded status;
poor market performance and other risks to the asset values of NextEra Energy's
and FPL's nuclear decommissioning funds; changes in market value and other risks
to certain of NextEra Energy's investments; effect of inability of NextEra
Energy subsidiaries to pay upstream dividends or repay funds to NextEra Energy
or of NextEra Energy's performance under guarantees of subsidiary obligations on
NextEra Energy's ability to meet its financial obligations and to pay dividends
on its common stock; the fact that the amount and timing of dividends payable on
NextEra Energy's common stock, as well as the dividend policy approved by
NextEra Energy's board of directors from time to time, and changes to that
policy, are within the sole discretion of NextEra Energy's board of directors
and, if declared and paid, dividends may be in amounts that are less than might
be expected by shareholders; NextEra Energy Partners, LP's inability to access
sources of capital on commercially reasonable terms could have an effect on its
ability to consummate future acquisitions and on the value of NextEra Energy's
limited partner interest in NextEra Energy Operating Partners, LP; effects of
disruptions, uncertainty or volatility in the credit and capital markets on the
market price of NextEra Energy's common stock; and the ultimate severity and
duration of public health crises, epidemics and pandemics, including the
coronavirus pandemic and its effects on NextEra Energy's or FPL's businesses.
NextEra Energy and FPL discuss these and other risks and uncertainties in their
annual report on Form 10-K for the year ended December 31, 2020 and other
Securities and Exchange Commission (SEC) filings, and this Form 8-K should be
read in conjunction with such SEC filings. The forward-looking statements made
in this Form 8-K are made only as of the date of this Form 8-K and NextEra
Energy and FPL undertake no obligation to update any forward-looking statements.
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