Trackers or Cost Recovery Clauses in Florida

1. Trackers or Cost Recovery Clauses in Florida History And Basis for use in Florida Ratemaking

2. State Regulatory Proceedings • Administrative rather than judicial hearings • Technical or evidentiary (e.g. rate cases, fuel hearing) • Submission of testimony and exhibits in advance • Rulemaking – concerns all utilities of a particular type • Electric infrastructure Storm Hardening • Meter readings • Prudence Reviews • “Used and Useful” standard relied upon • Significant increase in the 1980s - $10B disallowed, primarily due to nuclear plant costs • Competitive bidding – Need Determination Process

3. Trackers or Cost Recovery Clauses • Background • Purpose of Trackers – a.k.a. clauses • History of Trackers in Florida • Benefits for Customers • Prudence reviews help keep costs low • IOU’s typically don’t profit on clauses • Reduced lumpiness in customer rates • Benefits for IOU’s • Cash flow benefits • Reduced financial risks results in reduced borrowing costs • Substitute for full-blown Rate Proceedings? • Recent Trends

4. Trackers or Cost Recovery Clauses • Trackers or pass thru clauses – costs approved by the Commission; dollar-for-dollar recovery of prudent costs • Fuel & Purchased Power Cost Recovery Clause (Fuel Clause) and Purchased Gas Adjustment (PGA) • Capacity Cost Recovery Clause • Environmental Cost Recovery Clause (ECRC) • Energy Conservation Cost Recovery Clause (ECCR) • Required annual filings for each cost recovery clause • March – true-up of previous years costs • August – 6 months of actual & 6 months of projected costs • September – projected costs for the upcoming year

5. Cost Recovery Process & Time Line

6. TOTAL BILL: $107.02 RATE COMPONENTS BILL COMPONENTS Gross Receipt Tax: A tax collected by the company on behalf of the state which is applied to electric sales. Gross Receipts Tax Fuel: The recovery of expenses approved by the FPSC for the fuel the company uses at its power plants and the power purchased from other utilities and wholesale marketers. Fuel Charge Conservation: The recovery of expenses approved by the FPSC for energy conservation programs offered by the company. Environmental: The recovery of expenses approved by the FPSC for environmental compliance projects. Energy Charge Capacity: The recovery of expenses approved by the FPSC for purchasing off-system capacity from co-generators & others. Non-Fuel Energy: Covers the costs (excluding fuel) to produce the electricity that our customers purchase. (Base Rates) Customer Charge: Flat monthly charge that covers the expenses incurred by the company for metering, meter reading, service drops, billing, etc. (Base Rates) Customer Charge Residential Rate/Bill Components ($/1,000kWh) As of January 2011

7. Final Thoughts • Trackers primarily serve to reduce the regulatory lag associated with recovering costs to serve • Costs must be prudently incurred to be recovered • Customers benefit by seeing less lumpiness in rates • While trackers reduce risk and improve borrowing costs they also reduce available rate base or costs from which to earn a return • Trackers do impact the utilities overall price

8. Questions?