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Mixed Reviews

Utility trying to buy Constellation Energy is object of respect, hate in booming Fla.

September 24, 2006|By Paul Adams | Paul Adams,Sun reporter

FORT LAUDERDALE, Fla. -- In the eyes of many consumers and politicians, this city's gentrified Rio Vista neighborhood represents the best and worst of Florida Power & Light's potential as a merger partner for Baltimore's Constellation Energy Group Inc.

Its modest 1,200-square-foot ranch homes are gradually being torn down and replaced with 4,000-square-foot, multimillion-dollar behemoths that consume triple the kilowatts. With boulevards flanked by postcard-worthy palms and majestic Gumbo Limbo trees, it is among the wealthiest neighborhoods in one of Florida's fastest-growing economies, helping to drive profits and enhance the favorable Wall Street image of the utility's parent company, FPL Group Inc.

But when Hurricane Wilma - a medium-sized Category 1 storm - sent aging utility poles and power substations tumbling with frightening efficiency in October 2005, a darkened Rio Vista also came to symbolize the public fury that surrounded FPL. And it came just as executives were sitting down to negotiate their $11 billion takeover of Constellation.

Historically praised in the industry for being a smartly managed utility, FPL found itself accused of skimping on maintenance before last year's hurricanes.

The result, some argue, was power outages that left three-quarters of its 4.3 million customers without lights after Wilma.

That performance has left the Florida utility with what it calls a perception problem, even though executives and many of its critics say they were merely the victims of nature's wrath. It also comes as FPL is working to become the parent company to Maryland's largest utility in a deal that still faces regulatory hurdles. Executives are sorting out a Maryland Appeals Court decision last week that appears to block current state regulators from ruling on the merger.

So while residents and politicians in Maryland have fought bitterly over utility rates, the makeup of the state's utility commission and the size of Constellation Chief Executive Officer Mayo A. Shattuck III's paycheck, residents in South Florida have remained focused on one thing: keeping the lights on during the next hurricane.

"I think the perception of FPL in Florida is that they do a good job, but they extract a very handsome price for doing it," said Harold McLean, Florida's public counsel, which represents utility customers before the state's Public Service Commission. "It's a well-run company that Florida citizens love to hate."

Fort Lauderdale was among the hardest hit after Wilma and went almost completely dark, giving Rio Vista residents - including the city's outspoken six-term mayor - a rare glimpse at the stars over South Florida.

"My opinion after Wilma is that the officials at Florida Power and Light don't possess the business acumen to run a reliable power grid," said Mayor Jim Naugle, who wants the city to take over the power grid from FPL when its franchise agreement expires in 2009.

Many consumer advocates and industry officials doubt the utility deserves such rhetoric considering its power grid was pounded by an unprecedented seven hurricanes in less than two years.

Before the storms, FPL scored among the best in reliability measures and enjoyed high customer satisfaction ratings in J.D. Power and Associates surveys. FPL officials say those metrics challenge the notion that the utility has been cutting corners, or that management would seek to do the same at Baltimore Gas and Electric if the merger closes.

"The hurricanes certainly have affected our customers' perception of our company," said Armando Olivera, president of Florida Power & Light, the regulated utility operated by FPL Group. "I think some of these hurricanes hit areas that hadn't been hit by a hurricane for a number of years and, frankly, people had forgotten ... the implications."

Sitting in his wood-paneled office at FPL's bucolic Juno Beach headquarters, Olivera was unapologetic for the utility's maintenance standards before Wilma, saying the company had already built its system to a standard higher than the U.S. average. It has since filed a plan with regulators to upgrade its entire system to withstand a Category 5 storm, which he says would be a first for any utility.

"That's been our policy for a very long time," he said of the company's standards. "If you look at the performance of our system in non-hurricane conditions, we have one of the best reliability [records] measured in terms of average number of minutes a customer is without power in the U.S. - about half the U.S. average. So you can't have that level of reliability if you have a crummy system that is not well-maintained and falling apart."

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