FPL May Be Hit Hard for '08 Outage

January 28, 2009

 The Miami Herald

Florida Power & Light expects to get hit with 25 or more
violations of reliability standards and perhaps millions of dollars in
fines for an outage last year in which a field engineer's blunder
caused about one million customers statewide to lose power.That announcement in a federal securities filing Tuesday came on
the same that the utility's parent, FPL Group, announced its best year
ever -- $1.6 billion in profit -- even as its utility lost customers amid the
economic downturn.

The Feb. 26 blackout started when an engineer working alone
disabled two levels of relay protection in trying to diagnose a
problem in a substation in West Dade. His work then sparked a small
fire, which within a minute shut down a major part of the electric
grid, including the nuclear reactors at Turkey Point.

Experts wondered why there hadn't been safeguards in place to
stop an error from cascading so quickly through the system.

The filing with the Securities and Exchange Commission said the
penalties could come from the Federal Energy Regulatory Commission,
which has been investigating the outage.

The FERC and FPL have been involved in settlement discussions.
If a settlement is not reached, FPL believes federal regulators "will
pursue formal enforcement proceedings in which FPL expects the FERC
may or will assert up to 25 or more violations of the reliability
standards.

"The maximum statutory penalty for any violation of a reliability
standard is $1 million per day. FPL believes that, in any such
enforcement proceeding, the FERC may or will assert that some of the
alleged violations have continued from January 1, 2008," the utility
said in the filing.

"FPL believes that it has meritorious defenses and will
vigorously contest any penalties, should they be assessed," the
company said, adding that "FPL does not expect that the ultimate
resolution of this matter will have a material adverse effect on its
financial statements."

$16.4B IN REVENUE

That down note marked in what was in many ways a highly positive
year for FPL Group. Overall, the company had revenue of $16.4 billion,
with the utility providing $11.6 billion of that.

While many businesses across America struggled, the holding
company's unregulated utility, which now goes under the name NextEra
Energy Resources, brought in $915 million in profit, up from $540
million in 2007.

NextEra provides wind, nuclear and solar power to many areas
around the country. Its growth overcame slumping profits from the
utility in Florida, which saw net income decline to $789 million, down
from $836 million in 2007.

THE DOWNTURN

The utility struggled with the downturn in the Florida economy.
After years of adding 2 percent more customers annually, FPL had 11,000
fewer customers at the end of 2008 than it had at the end of 2007.

Retail sales of electricity decreased 2.4 percent for the year
-- and 8.4 percent in the fourth quarter. Mild weather accounted for 0.9
percent of the annual decline. The rest came from penny-pinching
customers reducing their power usage. The utility compensated by
reducing its operations and maintenance costs by 10 percent compared
with the amounts budgeted for the year.