FPL: Powering Florida

Florida Power & Light Company is among the largest and fastest growing electric utilities in the United States. Building on its solid reputation for quality operations and with a goal to meet and exceed its customers' expectations, the company over the past decade has succeeded in:

improving reliability and system performance;
reducing costs and becoming a more efficient organization;
adding generation capacity to meet future growth; and
increasing revenues and earnings.

FPL continues to build on these and other areas that are critical to its future success. In addition, the company recognizes the importance of safety and environmental stewardship as core values transcending all its operations.

Delivering value to customers

Customers expect more from their electricity provider today than ever before, and FPL is working to exceed their expectations. This is essential to good business practice generally, but will be especially important should the day arrive when customers have a choice of electricity providers in Florida.

Market research indicates that in a competitive market, one of the most important factors in maintaining customer loyalty is keeping prices low. FPL has been doing this for some time as a result of its ability to reduce costs and be more productive.

In April of last year, a revenue-sharing agreement reached by FPL with the Florida Public Counsel and the Public Service Commission reduced base rates by more than $1 billion over a three-year period. Residential customers received a 6% rate cut, and large industrial customers' rates were reduced as much as 12%.

Despite reducing customers' rates, and, thus, FPL's revenues, the agreement provides FPL and its shareholders some crucial benefits. In addition to stabilizing rates for a three-year period, the agreement provides incentives for growing earnings, generally permitting further reductions in costs to benefit earnings.

An additional 2% reduction in rates was approved by the Florida Public Service Commission in late 1999 and became effective January 1 of this year.

The decrease was due in large part to FPL's ability to generate more electricity at its power plants, thereby enabling the company to take advantage of the trading skills of its Energy Marketing and Trading Division (EMT) to sell excess electricity to other utilities. Gains from these energy sales flow directly back to FPL customers through a cost recovery clause. This reduction has no impact on earnings.

FPL's rates are now at their lowest levels in 16 years and the lowest among Florida's major investor-owned utilities. Nationally, average residential rates are 23% higher than those of FPL. Rates in California, where deregulation is in effect and customers have a choice of energy providers, are 45% higher than FPL's.

Since 1985, when the last increase in base rates went into effect, FPL's rates have declined more than 16%. Adjusted for inflation, FPL's rates are the lowest in the 75-year history of the company.

Reducing costs; increasing productivity

Throughout the 1990s FPL has worked to reduce costs and restructure its organization to increase the efficiency of its operations. By "working smarter" and focusing its attention on what is most important to customers, the company has achieved enormous improvements in productivity and how it does business.

FPL today serves nearly 600,000 more customers than in 1990 with far fewer employees. Since 1990 FPL's operations and maintenance expenses per kilowatt-hour have been reduced by 36%. This has helped FPL to lower the price of electricity.

Accommodating growth

Florida enjoys a thriving economy, and FPL's annual customer growth rate, of more than 2% is 36% higher than that of most other electric utilities. In 1999 more new customer accounts were added than at any time since 1990, bringing the total number of customer accounts to approximately 3.8 million.

Projections call for continued population growth of approximately 600,000 within FPL's service area over the next five years. Energy usage also is expected to increase, although usage per customer declined slightly in 1999 due primarily to milder weather than the prior year.

To accommodate this growth, FPL announced expansion plans to increase its current generating capacity of about 16,500 megawatts by approximately 25% during the next decade. By 2003, FPL will add nearly 2,500 megawatts to its system through repowering two existing plants at Fort Myers and Sanford, and by adding additional gas-fired peaking units at its Martin County plant site.

By utilizing natural gas as a fuel, FPL will not only significantly expand its capacity, but will reduce plant emissions as well. This will add to FPL's record as one of the cleanest power producers in the United States.

Building a culture of service

Reducing costs while maintaining or improving the quality of service and reliability is a major challenge for any utility and one that FPL has met with remarkable success.

Since launching an aggressive three-year, $450 million program in 1997 called Reliability 2000, FPL has dramatically improved the levels of its service.

After impressive results in 1998, even greater improvements were achieved in 1999, including:

a 25% reduction in the average amount of time customers were without power during the year, from 100 minutes to 75 minutes. This is well below the national average.

· a 7% decline in the average length of interruptions, from 65 minutes to 61 minutes, and

a 7% decline in the average length of interruptions, from 65 minutes to 61 minutes, and
a 19% reduction in the frequency of service interruptions for all customers, from 1.5 to 1.2 annually.

In addition to providing greater reliability, FPL is utilizing the latest technologies to develop innovative new programs that enhance customer service.

As an example, consumers may now log onto FPL's Web site to have electric service connected or disconnected and to obtain useful information about how to better manage their electricity usage. A system called E-bill allows them to pay their bills electronically via the Internet. An automated phone line gives customers specific information about why an outage occurred and when power will be restored.

In acknowledgment of its efforts in this area, FPL was presented the 1999 Ultra Award by the industry publication Public Utilities Fortnightly and IBM. The award recognized FPL for developing "the most innovative application for information technology" among energy companies. In addition, FPL was recognized for having one of the top 10 most useful and effective Web sites in a worldwide evaluation of 144 utility Web sites conducted by Andersen Consulting.

In 1999 J.D. Power and Associates and Metzler & Associates initiated the first annual nationwide survey of electric consumer satisfaction. The survey measures how customers feel about the service of the nation's top 78 electric utilities in several key areas, including response to customers, care and concern, the ability to quickly and accurately answer questions, and follow-through to customers.

In each of these areas, customers judged FPL to be among the premier performers nationwide, at or near the top 25%. In Florida, FPL was rated best overall among the major utilities and received the highest ratings in virtually every category of customer concern.

These included:

The willingness to

help reduce the price of electricity;
help in understanding monthly bills and available pricing options;
convenient service hours;
courteous, caring, knowledgeable, and helpful service representatives; and
the ability to effectively communicate any changes that may affect electric service.

Of particular importance to today's consumers are customer call centers because this is where customers most often communicate with companies. FPL's call center representatives received particularly high marks from customers for their ability to solve problems or answer questions over the phone quickly and courteously.

World-class performance: reliability

FPL's power plants continued their outstanding performance in 1999.

One key measure of plant performance is "availability" - the percentage of time a plant is available to produce electricity. FPL's fossil-fueled plants - those that use coal, oil or natural gas as fuel to generate electricity - achieved 93% availability during 1999. This performance compares to an industry average of 87%. FPL's fossil fleet ranks in the top 10% of similar plants nationwide.

FPL's nuclear plants also are setting records for excellence. The 1999 availability factor of 94% is the highest ever achieved at FPL and well above the industry norm. Both of FPL's nuclear facilities - Turkey Point south of Miami and St. Lucie on Hutchinson Island - are recognized as being among the nation's best.

The two nuclear units at Turkey Point have been providing FPL customers with clean, economical energy since the early 1970s. The units at St. Lucie were completed in 1976 and 1983. Both plants were originally licensed to operate for 40 years.

FPL intends to submit applications to the Nuclear Regulatory Commission to renew the license and extend the operations for both Turkey Point and St. Lucie. The application for Turkey Point - where the units' operating licenses expire in 2012 and 2013 - is expected to be filed later this year. The application for St. Lucie is scheduled for 2002. It is anticipated that the review process will take approximately two years.

In 1999 Turkey Point was selected by Power magazine to receive its annual Power Plant Award. The nuclear plant was praised for its "creative management practices" and its leadership in the application of advanced equipment designs, as well as operating and maintenance techniques.

Turkey Point and St. Lucie both continue to receive exceptional ratings from the World Association of Nuclear Operators.

Superior plant performance is significant in that it helps utilities to avoid the cost of building additional electric plants. In addition, the plants' ability to produce maximum power provides excess generation that can be sold to other utilities.

The gains from these energy sales, handled through the utility's Energy Marketing and Trading Division (EMT), flow back directly to customers through a cost recovery clause and help lower the price of electricity.

EMT is a leading wholesale marketer and trader that utilizes state-of-the-art systems to trade gas, oil and power 24 hours a day, 7 days a week. Its transactions exceeded $1 billion during 1999, benefiting FPL customers with an estimated $62 million in savings.

Rising to the occasion

During 1999 the resources of FPL and the resolve of its employees were once again tested by major storms that swept through the utility's service area.

In September, Hurricane Floyd left more than half a million customers without power. Service was restored within 72 hours.
In October, Hurricane Irene followed with even greater devastation. A combination of high winds and heavy flooding affected more than 1.7 million customers, and service was virtually restored within 48 hours.

In response to each storm, thousands of FPL employees, contractors and crews from other utilities worked around the clock to restore power as quickly as possible.

Quality: a cornerstone

As part of its long-standing quality culture, Florida Power & Light utilizes a variety of quality processes to enhance its position as a high performance organization capable of continuous improvement.

Part of the company's quality efforts focus on establishing "best practices" - that is, to find superior ways of doing business and to spread those practices throughout the organization.

Y2K

FPL was one of the first utilities to begin preparing for the new millennium, and its comprehensive Y2K preparations were essentially completed by June of last year.

Replacing or repairing computerized equipment and systems that might have been affected by the rollover to the year 2000 was a massive project involving the work of hundreds of employees. Thanks to their extraordinary efforts, the new century entered with no disruptions in electric service to customers.

Focus on safety

Nothing is more important in the operations of FPL Group than safety. Accordingly, the company insists that its employees treat safety and all the practices associated with it as core values never to be compromised. In 1999 the number of serious employee injuries for every 200,000 hours worked at FPL was 3.18.

Building on our environmental commitment

FPL is committed to operating all of its facilities in harmony with Florida's sensitive eco-system to make the state a better place to live and work. In line with this commitment, FPL takes every opportunity to minimize the effects of its operations on the environment.

As a result, FPL's power plants are among the "cleanest" in the nation with fewer emissions per megawatt-hour of electricity generated than all other major electric utilities in Florida.

Over the last five years, FPL has reduced sulfur dioxide by 20%, carbon dioxide by 35% and nitrogen dioxide by 32%.

FPL also is reducing significantly the amount of hazardous waste materials such as paint and solvents. These wastes have been reduced 89% since 1986.

In addition, FPL is taking steps to protect Florida's valuable water resources through recycling. Equipment is being installed at several power plants to reduce by 30% the amount of water taken from cities or wells for use in plant processes.

Recycling of materials such as scrap wood, cable, porcelain, and metals also is increasing. FPL recycled almost 20,000 tons of these and other materials in 1999, up from 11,000 tons in 1995.

By recovering ash and selling it to be recycled for commercial purposes such as concrete production, FPL has virtually eliminated landfill burial of ash from its fuel plants.

FPL's recycling and waste reduction efforts were recognized for the second year in a row in 1999 when the company was named one of 20 "program champions" nationwide by the U.S. Environmental Protection Agency in conjunction with its "WasteWise" program.

Conservation: encouraging the wise use of electricity

While adding new facilities to meet the growing energy needs of its customers, FPL continues to emphasize energy conservation programs to encourage the "wise use of electricity." This helps reduce energy demand during peak periods and allows the utility to defer building additional new power plants that might otherwise have to be built, saving money and natural resources.

One example is the "On Call" program in which residential customers can allow FPL to automatically turn off certain home appliances for short periods of time during peak energy usage. This enables FPL to meet exceptionally high demands for electricity, while allowing customers to receive credits on their bills.

FPL also works with business customers to help them save money by using energy more efficiently. The Commercial Industrial Building Envelope program offers rebates for such items as window film, awnings, shutters, high-efficiency windows, and roof and ceiling insulation.

Building strong communities

FPL's involvement in the communities it serves extends beyond meeting its customers' energy requirements to caring about other important needs such as education, health and human services.

In 1999 FPL invested $200,000 in scholarship funds at Florida A&M University, one of the nation's top institutions for African-American students. FAMU has been a source of outstanding talent for FPL's work force for many years and, with even closer ties to the school, the number of successful FAMU alumni employed at FPL is expected to grow in the future.

At the middle school level, FPL sponsors the South Florida Future Cities competition. The program allows students, with coaching from teachers and engineers, to design next-generation cities. In this way students can experience the excitement and promise of engineering as a career, as well as better understanding the complexities of developing and managing a community.

To spark interest in science education, a special program called "FPL's Electrifying Experience" is being made available to public schools throughout the FPL service area. Robert Krampf, also known as "Mr. Electricity," expects to visit more than 200 schools during the current school year, educating students from kindergarten through sixth grade on the basics of electricity and electrical safety.

In 1999 FPL employees pledged a record $1.8 million to 26 United Way organizations located within the company's service area. This was a 12% increase over the previous year and, combined with the company's contribution, resulted in a total of $2.4 million to help fund a wide variety of local community programs for individuals and families in need.

President's Cup

The commitment to finding a better way is showcased each year at FPL's Quality and Safety Expo. Teams of employees from virtually every area of the company gather to display their skills in the use of quality tools and techniques to achieve positive results.

The quality teams judged to be the best in the company compete for the President's Cup. In 1999 a team of employees from the nuclear division captured the award for their innovation in adapting a medical technology called computed radiography. With this technology, plant personnel are better able to determine whether pipes are thinning due to external corrosion or internal erosion. Tests can be conducted during normal plant operations rather than waiting for the plant to shut down for scheduled maintenance. Also, compared with previous inspection methods, computed radiography reduces the risk of injury. Using this process has already generated significant savings.

FPL monitors its quality progress by periodically measuring the performance of major business units against criteria used in competition for the Malcolm Baldrige National Quality Award. The business units are examined and compared with the most successful companies in such important areas as strategic planning, customer and market focus, business results, and leadership.