By Christine Buurma and Mark Peters Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- FPL Group Inc. (FPL) may decide against building a natural-gas pipeline and new nuclear reactors in Florida if the company doesn't get a favorable decision from state regulators on an electric-rate proposal, said Lew Hay, the company's chairman and chief executive, in an interview Thursday. Florida's Public Service Commission, which oversees utilities in the state, was rocked by allegations earlier this year that two of its commissioners acted improperly by attending dinners and parties hosted by executives of the utilities the PSC regulates. Gov. Charlie Crist appointed two new commissioners to the PSC earlier this month after deciding not to reappoint the commissioners who had been accused of misconduct. The upheaval has FPL executives concerned that Florida Power & Light, the company's utility subsidiary, won't get fair treatment from regulators. Florida Power & Light has asked to raise annual base rates by about $1.3 billion, or 30%. Base rates compensate utilities for investments in power plants, substations, wires and other equipment, along with setting their allowed rate of return. "I think there is fair amount uncertainty about how the commission is going to act," Hay said. He said a recommendation by commission staff earlier this week on a pending rate increase filed by Progress Energy Inc. (PGN) "wasn't terrible." The staff backed a revenue increase of $174 million compared to $500 million requested by Progress, which serves central Florida and the Gulf coast. Yet staff recommendations in recent months have become less of a barometer for the commission's final decision. In October, the PSC, contrary to its staff's recommendation, voted to deny Florida Power & Light's proposal to build a new $1.5 billion underground natural-gas pipeline, arguing that the project wasn't the most cost-effective and reliable way to bring more gas to the state. The utility hasn't decided whether it will submit a new pipeline proposal to regulators, Hay said. The company's decision to build two new reactors at its Turkey Point nuclear power plant in south Florida will also hinge on Florida Power & Light's relationship with regulators, he said. FPL estimates the project will cost $17 billion to $20 billion. "That's a lot of money to put into a state where the politics of the day determine how much you're going to earn on infrastructure investment," Hay said. FPL shares closed down 32 cents, or 0.6%, at $53.00 Thursday. -By Christine Buurma, Dow Jones Newswires; 212-416-2143; christine.buurma@dowjones.com
