Florida Power & Light

Florida Power & Light continued to demonstrate in 2003 the distinguishing characteristics that make it one of the nation’s premier electric utilities and a solid example of sustained success.

Among the factors that set FPL apart from most of its peers are continued strong growth, operational excellence, superior cost performance and a constructive regulatory environment. This winning combination, once again, allowed the company to deliver outstanding value to customers and FPL Group shareholders.

Nation’s fastest-growing utility

In number of customers served, FPL is the nation’s third largest investor-owned electric utility and among the fastest growing. In 2003, the company’s average number of accounts grew by more than 97,000, or 2.4 percent, to more than 4.1 million. It was the greatest customer growth experienced by FPL since 1989. In 2004, customer growth is expected to be about the same.

Over the last three years, Florida’s rate

Ability to… capitalize on growth

Construction began in 2003 on expansion projects at FPL’s Martin power plant (shown here) and Manatee power plant sites. The two projects will add 1,900 megawatts of generation in 2005, enough power to sustain the needs of approximately 400,000 new customers while helping to maintain a 20 percent reserve margin for all FPL customers. The natural gas-fired, combined-cycle generators at the two sites will be among the cleanest and most cost-effective in the state.

of population growth has been the highest among the nation’s largest states, and its population has increased by nearly one million people. Six of the 10 fastest-growing metro areas in the United States are in Florida, and half of those are located in FPL’s service territory.

Florida’s increase in population has created a record housing boom, representing more than 11 percent of the nation’s housing starts in 2003. In addition to being drawn by Florida’s climate and quality of life, residents are being attracted by new job opportunities in an increasingly diverse market. In 2003, Florida’s job growth was the highest in the nation and greater than that of the next four highest states combined.

The electricity usage of FPL’s customers also continued to rise in 2003, up 1.7 percent over the previous year. Electricity usage by FPL’s residential customers is among the highest in the industry. In fact, FPL now sells more retail kilowatt-hours than any other utility in the U.S. In 2003, total sales reached an all time high of more than 103 million megawatt-hours. Since 1993, FPL has averaged annual total sales growth of 3.6 percent compared to the most recently reported 10-year industry average of 2.4 percent.

Meeting increased demands of growth

FPL is meeting the increased demands of its customers by adding to its generation capacity and infrastructure, improving its operating performance and enhancing customer loyalty.

The utility added more than 1,400 megawatts of generation during 2003, increasing the capability of its generating fleet to more than 19,000 megawatts. The additions included 314 megawatts from new peaking units at the Fort Myers power plant and 957 megawatts from the repowering of Unit 4 at the Sanford power plant. The utility’s total generating capability — including more than 3,000 megawatts of purchased power — grew to more than 22,000 megawatts.

Construction also began on expansion projects at FPL’s Martin and Manatee power plant sites. The two projects will add about 1,900 megawatts of generation in 2005 at an investment of over $1 billion. This will provide enough power to meet the needs of approximately 400,000 new customers while helping maintain a 20 percent reserve margin for all FPL customers. Both projects are utilizing natural gas-fired, combined-cycle generators that will be among the cleanest and most cost-effective in the state.

FPL also plans to build, subject to all necessary reviews and approvals, a 1,100-megawatt natural gas-fired plant at its existing Turkey Point plant site south of Miami. The $600 million unit is expected to begin operation in 2007 and will be capable of providing enough electricity to serve 230,000 homes and businesses. The Turkey Point expansion will enable the company to add needed generation near one of its major population growth centers.

The added generation was identified through a long-term planning process that has enabled FPL to maintain an adequate supply of power while meeting the challenge of continued growth.

Ability to... continue operational excellence

Since the late 1800s, humans have been altering the Everglades. In recent times, mankind has learned the valued importance of the Everglades ecosystem and has embarked on the largest environmental restoration project in the world to restore the Everglades to its natural condition. FPL’s 13,455-acre Everglades Mitigation Bank, adjacent to the Turkey Point power plant south of Miami, is a critical link in the success of the overall restoration effort. This sensitive ecosystem also is home to 38 species of wildlife, of which 12 are endangered and nine are threatened.

Since the beginning of this decade, the company has added more than 2,600 megawatts of generation at a cost of approximately $1.3 billion. Over the next four years, FPL expects to invest more than $1 billion more in new generating facilities. Steady Customer Growth: Average customer accounts rose from 3.35 million in 1993 to 4.12 million in 2003.

In addition to adding generation, FPL has invested more than $3.3 billion in its power delivery infrastructure since 1998 and expects to spend approximately $3.4 billion through 2008. The investment includes several major new transmission lines on both the southeast and southwest Florida coasts.

Upgrading and adding to its transmission capabilities has helped FPL avoid transmission-related blackouts such as that experienced throughout the Midwest and the Northeast in the summer of 2003. Further safeguards against blackouts include the superior operations of FPL’s electric system and the close cooperation of Florida’s utilities regarding system security and operations. As a peninsula, Florida has few inter-connections outside the state, which makes it easier for FPL and other utilities to monitor and control the flow of electricity in the state.

Continued high performance

One of the hallmarks of FPL is its strong all-around operating performance, and the company continues to excel in virtually every area of its operations.

In 2003, the availability of FPL’s fossil power plants remained above the industry average. The company’s nuclear plant availability of 90.9 percent was also above the industry average, but down from the previous year. The decline was primarily due to reactor vessel head inspections, mandated by the Nuclear Regulatory Commission, which extended some planned refueling outages.

FPL’s power plants utilize a diverse mixture of fuels to generate electricity, allowing the company to minimize fuel costs and maintain greater operating flexibility. During 2003, clean-burning natural gas accounted for 34 percent of the power provided by FPL. Greenhouse gas emissions-free nuclear was the fuel source for 21 percent, followed by purchased power at 20 percent, oil at 19 percent and coal at 6 percent.

Since launching a major initiative in 1997, FPL’s reliability has continued to improve every year. In 2003, the average amount of time each of FPL’s customers was without power was reduced to just 68 minutes, less than half the most recently reported industry average. The frequency of interruptions has been reduced 20 percent since 1997, and the duration of interruptions has been reduced 38 percent.

The high degree of reliability achieved during 2003 was especially notable in light of the highly unusual weather experienced throughout the company’s service area, which included Florida’s coldest winter since 1981. The number of lightning strikes during 2003 also was the highest ever recorded by FPL.

In addition to rapidly restoring power to its own customers under emergency conditions, FPL was among the recipients of the Edison Electric Institute’s “Emergency Assistance Award.” The honor was given in recognition of FPL’s restoration of power and assistance to customers of Dominion Virginia Power in the wake of massive damage caused by Hurricane Isabel.

Keeping costs low and customers satisfied

FPL is an industry leader in managing costs, even as it expands and enhances its electric system and further improves its operating performance. The company’s operating and maintenance costs grew only modestly in 2003

Ability to... enhance customer satisfaction

This lush mangrove system borders Manatee Island, located in the Caloosahatchee River adjacent to the Fort Myers power plant. Mangrove ecosystems are well adapted to thriving in fresh and salt water conditions, and many species rely on the mangroves’ survival. Their complex root and branch systems act as shelter and protection for a number of birds, marine and land species. With FPL’s donation of this 18-acre refuge to the U.S. Fish and Wildlife Service in 2001, Manatee Island became the first addition to the Caloosahatchee National Wildlife Refuge, established in 1920.

despite the increased costs of nuclear maintenance, employee benefits and insurance. FPL’s costs per kilowatt-hour remain essentially flat and well below the industry average.

In recent years, FPL has focused on customer care with an emphasis on improving service and increasing customer loyalty. In 2003, two independent studies indicated that the company’s ongoing efforts are producing positive results.

FPL was rated second highest in the southern region and 10th best nationally in overall customer satisfaction by J.D. Power and Associates. Their annual customer survey of the nation’s 77 largest electric utilities gave FPL especially high marks in the areas of price and value, billing and payment, and company image. FPL has ranked above the industry average in overall customer satisfaction each year since the J.D. Power surveys began in 1997, and last year’s results were the best yet.

In addition, FPL earned the prestigious Center of Excellence certification from Purdue University’s Center for Customer-Driven Quality — the only electric utility to be so honored. The award places the company’s customer care centers at near world-class status.

Delivering value to customers

Florida’s progressive regulatory environment has allowed FPL to maintain a balanced focus on satisfying its customers while maintaining financial viability.

FPL’s current incentive-based agreement with the Florida Public Service Commission and the Office of Public Counsel is in effect until the end of 2005. The company looks forward to continued incentive-based rate agreements and the rate stability they bring. Such agreements allow FPL to better plan and manage its business, helping to ensure continued reliability and lower rates than otherwise might exist in less progressive regulatory environments. Diversified Energy Mix: Based on kilowatt-hours produced in 2003

Under FPL’s rate agreements, the company has been able to provide reliable power at reasonable prices, delivering added value to customers and shareholders alike. As a result of two base rate agreements — the first in 1999 that cut rates by $350 million annually and the second in 2002 that further reduced rates by $250 million — FPL customers will be saving $600 million a year through at least 2005.

Despite investments of more than $5 billion since 2000 in capital expenditures to meet growth and enhance reliability, FPL’s rates remain low compared to the national average and other utilities in Florida.

Extending benefits of nuclear generation

During 2003, nuclear power accounted for about 21 percent of FPL’s generation, and it is an important part of the company’s commitment to a clean environment.

In 2003, the Nuclear Regulatory Commission issued operating license extensions for the two units at the St. Lucie Nuclear power plant on Hutchinson Island for an additional 20 years. The St. Lucie license extensions were granted after a three-year application and review process that included a comprehensive safety and environmental analysis. In 2002, the NRC granted license extensions of the two nuclear power units at FPL’s Turkey Point plant located south of Miami.

During 2003, FPL performed extensive inspections of the reactor vessel heads for St. Lucie unit 2 and both Turkey Point units during scheduled refueling outages. Two minor cracks were identified and promptly repaired at St. Lucie unit 2. No indications of cracking were found at the Turkey Point nuclear units. As a proactive measure, the company has decided to replace the reactor vessel heads on each of its nuclear units during scheduled refueling outages over a four-year period beginning in 2004.

Also, as part of its commitment to ensure superior operating performance, the company plans to replace steam

Ability to... safeguard the environment

The unspoiled shoreline ecology at the St. Lucie nuclear power plant on Hutchinson Island provides an important sanctuary for nesting sea turtles. Several species of endangered and threatened sea turtles follow ancient instinct and return to these beaches annually to lay their eggs. During the summer, FPL sponsors popular evening walks where visitors can view nesting activities. The company also conducts nesting surveys for the State of Florida, maintains one of the largest sea turtle databases in the world and conducts a variety of scientific studies.

generators at St. Lucie unit 2 during the head replacement outage scheduled for 2007.

Maintaining environmental leadership

FPL is one of the cleanest utilities in the United States with overall emissions rates that are among the lowest in the industry, and it has long been committed to providing power in an environmentally responsible manner.

Driven by the increasing demand for electricity in its service territory, the company is the U.S. leader in “repowering” older oil-burning power plants, that is, converting them to state-of-the-art natural gas operations. In doing so, FPL has been able to significantly increase the capacity of older plants while increasing efficiency and reducing emissions.

The repowering of existing older oil-fired plants to larger gas-fired plants illustrates FPL’s ability to apply the proper technologies to address both its expansion needs and the environment. In 2003, the utility entered into agreements with the Florida Department of Environmental Protection to install pollution prevention technology that will substantially reduce emissions at both its Manatee and Port Everglades power plants. Superior Cost Performance: O&M per retail kilowatt-hour (cents)

FPL leads the nation in energy management and conservation programs. More than 1.7 million customers have participated in these programs over the past two decades, helping to reduce electricity demand by more than 4,100 megawatts, or the equivalent of 10 medium-sized power plants.

Early in 2004, FPL introduced a “green power” program called Sunshine Energy, which allows customers to help support financially the development of renewable sources of energy generation in Florida and nationwide, including wind, solar and bioenergy. Continuing its tradition of environmental leadership, FPL has committed to providing 150 kilowatts of solar capacity in Florida for every 10,000 customers who voluntarily enroll in the green energy program.

Looking forward, FPL is strongly positioned for continued success with a growing demand for electricity, high population growth, reasonable customer rates and a favorable regulatory environment.