After resolving a few accounting issues, including the costs of utility poles, the Florida Public Service Commission gave the go ahead for Florida Power & Light to finance its costs of storm recovery from 2004 to 2005 through a securitization of about $700 million, after estimating that storm recovery costs reached $1.13 billion.

Florida Power & Light, which set its storm recovery costs at $1.7 billion, was disappointed with the commission's decision, and might contest it. During a conference call on Wednesday, officials at the utility said the decision effectively proposes a form of cost sharing that might put its shareholders at a disadvantage.

"The imposition of sharing, whether done exclusively or through this indirect method, is inconsistent with past regulatory action," said Moray Dewhurst vice president and CFO of Florida Power & Light. "More importantly [it] is inconsistent with fundamental principals of regulated utility rate making, since it preclude the possibility of Florida Power & Light ever recovering some portion of its prudently incurred recovery costs"

Apparently, the utility also took issue with two issues underpinning the bond offering process, said a source familiar with the situation. The commission decided that the bond issue should be run under the lowest-cost-of-funds standard, and that it should have a say in how the bonds are structured, priced and marketed.

Commission's approval

The commission approved amounts that were largely in line with staff recommendations, including a reserve of $200 million. That might not sit well with Florida Power & Light, which has insisted that the reserve should be $650 million. At press time, word had it that the utility company would approach the commission again about raising the reserve amount.

Credit Suisse is slated to act as lead manager on the deal, representing Florida Power & Light, and meanwhile, Saber Partners will represent the state's public service commission. The parties had hoped to bring a deal to market by September, but an appeal might push the deal into later in the year.

(c) 2006 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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