The Florida Public Service Commission approved a settlement agreement for a two-year freeze in base rates for the state’s biggest electric utility, Florida Power & Light Co.

The commission Tuesday approved the agreement the company made with consumer advocates four months ago. The agreement will effectively freeze base rates paid by customers until the end of 2012.

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Attorney General Bill McCollum issued a statement in favor of the agreement.

“I commend the Public Service Commission and FP&L for adopting this important settlement today. We have worked for many months with the Office of Public Counsel, the Retail Federation, the Florida Industrial Power Users Group, the Federal Executive Agencies, the South Florida Hospital and Healthcare Association, and the Associated Industries of Florida to reach this settlement which will provide rate stability for the FP&L customers by freezing basic rates through 2012. This settlement benefits all parties, and I am pleased to see it approved.”

Base rates can be changed through 2012 only if the company’s profit rate falls below 9 percent or tops 11 percent.

Action was delayed by FPL’s court challenge to Commissioner Nathan Skop’s participation in its cases. The company alleges Skop is biased, which Skop denies.

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The 1st District County of Appeal has not yet ruled but agreed to let Skop vote on the rate freeze agreement. The five-member commission unanimously approved it.

According to FPL, the company serves 4.5 million customer accounts in Florida. FPL President and CEO Armando J. Olivera also said the agreement will benefit customers.

“We think this agreement is in the best interest of all of the parties involved, especially our customers. We appreciate the willingness of those who represent Florida’s electric consumers to work with us on an agreement that will help provide financial stability for customers and the company alike, and we appreciate the support for the agreement by the Commission and its staff.”

The key elements of the agreement are as follows:

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  • Cost recovery for a new combined-cycle natural gas unit at FPL’s West County Energy Center will be limited to the projected fuel savings for customers during the term of the agreement.
  • Costs for storm damage would be recoverable beginning 60 days from the filing of a petition but capped at $4 for every 1,000 kilowatt hours of usage during the first 12 months. If storm restoration costs exceed $800 million, the company may request cost recovery above the cap, and any additional costs would be recoverable in subsequent years.
  • If the ROE rises above 11 percent, the intervenors may seek a rate reduction. Earnings will be calculated using an actual, non-weather-adjusted basis.

Typical monthly bills for FPL residential customers are 24 percent below the national average and the lowest out of Florida’s 55 electric utilities, according to FPL.