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FPL's Hay relies on wind as rate case clouds utility outlook

FPL Group Inc. became the largest U.S. electricity producer by investing $11 billion in wind and solar power around the country. Those holdings are more critical to the bottom line after a utility rate ruling in Florida dimmed earnings prospects at the company's flagship unit. ...NextEra, which plans to build 1,000 megawatts of wind-generation capacity in 2010, helped push FPL past Southern Co. as the biggest U.S. power producer late last year.

FPL Group Inc. became the largest U.S. electricity producer by investing $11 billion in wind and solar power around the country. Those holdings are more critical to the bottom line after a utility rate ruling in Florida dimmed earnings prospects at the company's flagship unit.

FPL suspended $10 billion in investments at its Florida Power & Light Co. unit after state regulators ruled Jan. 13 that the utility can increase rates by $75.5 million, 92 percent less than requested. Chief Executive Officer Lew Hay, 54, said the decision reduced FPL's market value by more than $1 billion.

FPL, which has fallen 11 percent this year in New York trading, cut its profit forecast after the ruling and said it will take months to revise business plans. Meanwhile, Hay is charging ahead with expansion at NextEra Energy Resources LLC, the wholesale electricity unit that sells power to utilities and other customers in 26 U.S. states at market prices, rather than rates set by regulators.

"NextEra will continue to be the primary growth engine for the company," Hay said in a telephone interview from FPL's headquarters in Juno Beach, Florida. NextEra, which plans... more [truncated due to possible copyright]  

FPL Group Inc. became the largest U.S. electricity producer by investing $11 billion in wind and solar power around the country. Those holdings are more critical to the bottom line after a utility rate ruling in Florida dimmed earnings prospects at the company's flagship unit.

FPL suspended $10 billion in investments at its Florida Power & Light Co. unit after state regulators ruled Jan. 13 that the utility can increase rates by $75.5 million, 92 percent less than requested. Chief Executive Officer Lew Hay, 54, said the decision reduced FPL's market value by more than $1 billion.

FPL, which has fallen 11 percent this year in New York trading, cut its profit forecast after the ruling and said it will take months to revise business plans. Meanwhile, Hay is charging ahead with expansion at NextEra Energy Resources LLC, the wholesale electricity unit that sells power to utilities and other customers in 26 U.S. states at market prices, rather than rates set by regulators.

"NextEra will continue to be the primary growth engine for the company," Hay said in a telephone interview from FPL's headquarters in Juno Beach, Florida. NextEra, which plans to build 1,000 megawatts of wind-generation capacity in 2010, helped push FPL past Southern Co. as the biggest U.S. power producer late last year.

The wholesale unit generated more than half of FPL's profit in the past two years, up from between 20 and 48 percent in the previous four years. The company gets about three-fourths of its revenue from Florida Power & Light.

‘Uncharted Territory'

Hay and other utility executives face "uncharted territory" as power demand slumps, the recession makes states reluctant to raise rates and politicians battle over federal emissions rules in an election year, said John R. Colson, CEO at Houston-based Quanta Services Inc.

"I think it's very difficult to be the CEO of a utility these days," said Colson, whose company is the largest U.S. builder of power lines. Utility executives can't know how regulations will affect coal-fueled plants or nuclear generation, he said.

Florida Governor Charlie Crist, who's running for U.S. Senate, opposed rate requests by FPL and Progress Energy Inc. and got the state Public Service Commission to delay rulings until his latest new appointee took office last month.

In announcing the suspension of new nuclear plants and other energy infrastructure, the company cited a "deteriorating regulatory and business environment" in Florida.

‘Aggressive' Response

"That was about as aggressive a press release as I've ever seen," Quanta's Colson said in a Jan. 20 interview. "Utilities generally don't want to stir up trouble."

Hay, who grew up in a small town north of Pittsburgh, said he was disappointed that the rate case was "politicized" and that FPL's reputation was hurt. FPL hired law firm Carlton Fields to investigate allegations in letters by anonymous employees who said they were forced by executives to provide misleading information to regulators and shareholders, company spokesman Randolph Clerihue said.

Hay, a Lehigh University-trained electrical engineer, worked as a partner at Mercer Management Consulting after getting a master's degree in industrial administration at Carnegie Mellon University in Pittsburgh. He headed FPL's wholesale power unit before being named CEO in June 2001. He helped make it the largest U.S. wind and solar power producer.

FPL is looking to NextEra to keep driving its growth, even as the company faces increased competition in the U.S. from European wind power producers, Hay said.

Renewables Push

FPL can play a big role in the Obama administration's effort to double U.S. renewable-power generation, Hay said. To meet the goal, he said, the government must set a price on carbon emissions, impose a national renewables requirement and enable construction of more transmission lines.

As for measures to keep profitability from declining at Florida Power & Light, Hay declined to comment on possible steps. He said he promised the company's 15,000 employees last month that they would be first to hear of his plans.

"Over the years he's demonstrated a thoughtful and competent strategic perspective with respect to the company and its direction," said Paul Patterson, an analyst at Glenrock Associates LLC in New York. Some of the company's suspended infrastructure projects probably won't go forward, he said.

Hay demonstrated his strategic focus when he walked away from a proposed $12.4 billion takeover of Constellation Energy Group Inc. in 2006 rather than fighting an uphill battle with regulators opposed to the deal, Patterson said. "He knew when to throw in the towel and not expend any shareholders' resources further in the matter," he said.


Source: http://www.businessweek.com...

FEB 26 2010
http://www.windaction.org/posts/24843-fpl-s-hay-relies-on-wind-as-rate-case-clouds-utility-outlook
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