FPL's Letter to the Mayor on a Mid-Year Fuel Adjustment Increase

As you know from news accounts and your own recent trips to the gas station, the cost of fuel has risen dramatically. Reflecting the worldwide trend in oil and natural gas markets, the dramatic increase in the cost of fuel is requiring Florida Power & Light Company to propose to the Florida Public Service Commission an increase in the pass-through fuel charge. We expect this to increase residential customer bills by approximately 16 percent.

We never like having to increase the price customers pay for electricity, however, the increase in fuel prices that we have been experiencing is extraordinary. This is not unique to FPL; utilities across the country are experiencing the same issue.

The price of natural gas, which fuels 50 percent of FPL’s electricity generation, has risen from $8.17 per million BTU in July 2007 (which formed the basis of FPL’s 2008 fuel filing) to $10.75 per million BTU in May 2008, a 32 percent increase. Fuel oil, which powers 8 percent of FPL’s electricity generation, has risen for the same period from $57.81 per barrel in July of 2007 to $89.02 per barrel in May of 2008, a 54 percent increase.

As a result, we project that $746 million will be needed to cover the additional fuel costs through the end of 2008. FPL is proposing to recover these costs through an increase in the pass-through fuel charge, which will increase a typical 1,000 kilowatt-hour monthly residential bill from $102.63 to $118.91, or 54 cents a day.

Following established regulatory procedure for a mid-course correction on the pass-through fuel charge, we have asked the PSC to vote on the adjustment at its July 1 meeting. If approved, the fuel adjustment would be reflected in customer bills from August through December 2008. FPL will file its 2009 fuel-price projections with the PSC this September.

It is important to note that FPL customers pay only actual fuel costs that the company incurs. When fuel prices go up, the additional costs are passed through to customers, and when fuel prices go down, the savings are also passed through to customers. There is no profit of any kind for FPL on fuel, which represents about 70 percent of the typical commercial/industrial electric bill.

FPL has taken numerous steps to mitigate the impact of fuel costs by improving the efficiency of its existing plants and building new generation facilities with low or no fuel costs:

· FPL’s fossil fuel power plant fleet is the most fuel efficient among large-scale utilities nationwide. The company has improved fleet fuel efficiency by 10 percent in the past five years and by 18 percent since 1990. As a fossil power plant increases in efficiency, it can generate the same megawatt hour of electricity with less fuel, thus saving money for FPL customers and producing fewer greenhouse gases.

· Looking forward, FPL has proposed to modernize its power plants at Riviera Beach and Cape Canaveral, a move that will save customers roughly $450 million in fuel and other savings over the life of the project. The new units will be considerably more efficient than the existing facilities, using 33 percent less fuel to produce the same amount of power.

· FPL is also in the process of upgrading its existing nuclear facilities to produce an additional 400 megawatts of power, which is the equivalent of a medium-sized fossil fuel plant. Fuel costs for nuclear plants are dramatically lower than for fossil-fuel generation, costing roughly half a cent per kilowatt hour compared to 7 cents for natural gas and 10 cents for fuel oil.

· FPL has also proposed building new solar and wind generation facilities in Florida. The fuel used to power these renewable energy sources is free.

· In addition to upgrading its power plants, FPL operates the country’s number one program for energy efficiency and conservation, according to the U.S. Department of Energy. Working with our customers, we have been able to avoid building 12 medium-sized power plants since 1980.

We recognize that higher electric bills will be a burden on our customers, and we are encouraging them to take advantage of the many programs we offer to help them manage their monthly electric bills. They can start by visiting www.FPL.com and clicking on the Energy Savings Toolkit, where they will find tips to manage their energy usage, as well as a Home Energy Survey to find out how they can make their homes more energy efficient. Customers can also sign up for Budget Billing, which allows them to smooth out the amount of their monthly bills over the course of a year.

We at FPL are committed to continuing to do whatever we can to deliver the most cost-effective, reliable service possible to all our customers. If you have any questions or would like to discuss this matter, please feel free to contact me at 561-691-7114.

Sincerely yours,

Pam Rauch
Vice President
External Affairs