On January 27, 2009, Florida Power & Light Co. (“FPL”), a subsidiary of FPL Group, Inc., stated that it hopes it can reach a settlement with FERC staff regarding the February 26, 2008 blackout in Southern Florida. If FPL is unable to settle with FERC, it could end up facing severe fines for the incident under FERC’s power to assess civil penalties for violations of the mandatory reliability standards.

In its Form 8-K submitted to the U.S. Securities and Exchange Commission, FPL claims that the initial cause of the blackout was a fault that was unable to be cleared at a substation near Miami. The substation would normally be able to account for such a fault, but both the local primary protection and the local backup breaker had been removed manually by a FPL field relay engineer.

When the fault could not be cleared, the substation shut down roughly 1,350 MW of customer load and 2,500 MW of generation. The substation, in order to maintain grid stability, shut down an additional 2,300 MW of customer load and 1,800 MW of generation in the region causing widespread blackouts.

FERC launched a nonpublic investigation into the incident in March 2008, the first of its kind under the new reliability standards (see March 21, 2008 edition of the WER). Under its new civil penalty authority, FERC can issue a fine of up to $1 million per violation per day. FPL’s
8-K discloses that if FERC enforcement staff decide to pursue a formal enforcement action, staff may identify roughly 25 different violations committed by FPL. FPL also believes that staff may assert that the violations began on January 1, 2008 and continued up until the blackout, 57 days later. As such, FPL could be facing a significant fine. FPL maintains that it would have valid defenses to any civil fines and that the case’s ultimate outcome will not have an adverse impact on its financial statements.

A copy of FPL’s 8-K is available at: http://ccbn.10kwizard.com/xml/download.php?repo=tenk&ipage=6088949&format=PDF.