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FPL Will Pay $25 Million Fine for 2008 Blackout

The state’s largest power company agreed Thursday to pay $20 million to federal regulators and spend $5 million to improve the reliability of its electric grid after an investigation into a February 2008 South Florida blackout that left many customers without power for hours.

The fine for Florida Power & Light, levied by the Federal Energy Regulatory Commission and the North American Electric Reliability Corporation is the result of an investigation of a Feb. 26, 2008 blackout that began when an error at a West Miami FPL substation disabled transmission lines around the Florida peninsula. The organizations, which regulate interstate natural gas, oil, and electricity transmission and monitor reliability respectively, said it was the first under a 2005 law that allows penalties up to $1 million for each violation per day.

“Today’s settlement demonstrates the high priority the commission places on electric reliability,” FERC enforcement director Norman Bay said in a statement. “We take very seriously the reliability mission Congress handed to us in the Energy Policy Act of 2005 in order to protect consumers. The message to the industry is clear: compliance with the standards is critical.”

FPL, which serves South Florida and most of the Atlantic Coast, accepted the fine for the blackout, though the company attributed it to human error in lieu of system failure. However, the company disputed FERC’s findings that “millions” of customers lost power for “several hours.” Instead, the company said 600,000 customers were powerless for an average of an hour.

FPL added that though it agreed to pay the fine, the settlement did not require the company to admit any reliability standard violations in the blackout or assume any liability for it.

“We deeply regret the inconvenience this incident caused our customers and the communities we serve,” FPL President and CEO Armando J. Olivera said in a statement. “However, we disagree with the assertions of FERC’s Office of Enforcement. We believe the evidence and the findings of independent investigations demonstrate that FPL was in compliance with industry reliability standards and that this incident was, unfortunately, the result of the inappropriate and unauthorized actions of an individual.”

But despite those disagreements, FPL said accepting the settlement allowed the company and federal regulators to move on and focus on preventing future mass service interruptions.

“This event dates back to February 2008 and could take several more years and be very costly to resolve through litigation with a federal regulatory agency,” Olivera said. “Litigation would require the time and attention of the same people who are responsible for the reliability of the grid. As a result, we believe a settlement is an appropriate course of action at this time. FPL has a long-standing history of regulatory compliance and superior system reliability, and we are deeply committed to compliance with all FERC rules and regulations.”

The settlement came a day after a leading financial rating agency said that the political atmosphere of utility regulation in Florida recently could negatively affect the ability of large electricity providers like FPL to get credit. The analysis from Moody’s Investors Service came in the wake of Gov. Charlie Crist ousting two sitting members of the Florida Public Service Commission and several senators seeking to change state law about how members of the PSC are selected. The report was released a day after the panel rejected an FPL proposal for a $1.6 billion natural gas transmission pipeline.

The PSC is slated later this month to continue deliberations on a $1.3 billion rate increase request from FPL and a separate $500 million proposal from Progress Energy Florida. The panel is also scheduled to determine this fall whether or not the costs of new nuclear power plants planned by FPL at Turkey Point and Progress in Levy County should be passed on to their customers.

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