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Week 2 of FPL's rate case: Is the rate hike an unwanted tax or a needed investment?

State regulators began the second week of testimony this week in Florida Power & Light’s quest to obtain a $1.3 billion rate increase and the focus remained: How much profit should the state’s largest electric utility be allowed to make from customer bills?

The company concluded the first phase of its rate case before the Public Service Commission, proposing that its rates should be increased over three years as the company is rewarded with $360 million in higher profits for its “superior performance.” The request includes giving FPL the ability to earn a bonus of $120 million, a so-called “incentive adder” that would be on top of the additional $240 million a year in allowed profit the company is asking regulators to approve over what is currently allowed.

As a regulated monopoly, FPL faces no natural competition for its giant fleet of nuclear, gas and solar energy production and most of its 9 million customers have nowhere else to go for electricity. So the Public Service Commission plays the role as surrogate, imposing financial limits and performance incentives that competition might naturally create.

But opponents argue that the company should not be allowed to make higher profits as a “reward” for good performance but instead should be required to give customers a refund in return for the favorable terms they have enjoyed since the last full rate hearing in 2009. Read more here.