The Florida Public Service Commission (PSC) today announced the successful sale of $652 million Florida Power & Light (FPL) storm recovery bonds and directed FPL to reduce its current monthly storm surcharge. As a direct result of the bond issuance, FPL will lower the monthly storm cost recovery surcharge each residential customer pays by eight cents from $1.10 to $1.02 per 1000 kilowatt hours.
“The Commission worked diligently to ensure the structure, marketing, and pricing of the storm recovery bonds resulted in the best possible deal for FPL’s ratepayers,” said PSC Chairman Lisa Polak Edgar. “Provisions the Commission included to protect the interests of consumers proved instrumental in achieving a successful result.”
On Tuesday, May 15, 2007, Wachovia Capital Markets, LLC beat out bids from more than a dozen investment banks with an all-in cost of 5.23 percent. The bonds are rated Aaa by Moody’s, AAA by Standard & Poor’s and AAA by Fitch Ratings.
The special financing vehicle, known as “securitization,” was established by the Florida Legislature in 2005 to allow Florida’s investor-owned utilities to quickly recover storm costs in a way that reduces the burden on Florida’s consumers. FPL is the first investor owned utility in Florida to issue bonds as an option to pay for storm restoration costs and rebuild its storm reserve.
The PSC authorized the securitization financing technique on May 15, 2006, and consistent with its statutory responsibility issued a comprehensive financing order detailing the terms of the bond issuance including a “lowest cost objective.” The PSC included this provision to achieve the lowest storm recovery charges consistent with the law and the prevailing market conditions at the time of the offering and pricing of the bonds.
As required by the financing order, a Bond Team was established, comprised of representatives of FPL, the PSC, and both their designated advisors and legal counsel. The Bond Team took the following actions to protect FPL’s customers and achieve a successful result:
• Received an assurance from FPL that the storm recovery bonds would price at least as well as the most recent and most favorable transactions in this asset class. Specifically, FPL’s storm recovery bonds priced more favorably than both the 2006 American Electric Power securitization transaction in Texas and the recently completed Monongahela Power securitization transaction in West Virginia.
• Developed rating agency presentations and worked actively with the rating agencies to achieve Aaa and AAA ratings from the major rating agencies.
• Solicited a wide range of potential bidders to pursue competitive pricing for the bonds.
• Held group conference calls for potential bidders to describe the legislative, political and regulatory framework and the bond structure.
FPL customers can expect to see a reduction in the storm cost recovery surcharge beginning with utility bills issued Wednesday, May 23, 2007.
The PSC is committed to making sure that Florida's consumers receive their electric, natural gas, telephone, water, and wastewater services in a safe, affordable, and reliable manner. The PSC exercises regulatory authority over utilities in the areas of rate base/economic regulation; competitive market oversight; and monitoring of safety, reliability, and service.
For additional information, visit www.floridapsc.com.