UPDATE 2-U.S. oks $25 mln fine over Florida power blackout

(Adds details of blackout, comment from Florida Power)

By Tom Doggett

WASHINGTON Oct 8 (Reuters) - The U.S. government's power market regulator on Thursday approved a $25 million settlement against Florida Power & Light Co over a February 2008 blackout that left about 1 million consumers in South Florida without power for several hours.

The settlement is the Federal Energy Regulatory Commission's first civil penalty under its new electric reliability standards and its first joint enforcement effort with the North American Electric Reliability Corporation, the FERC-designated Electric Reliability Organization that oversees daily enforcement of the reliability standards.

Congress passed energy legislation in 2005 that was signed into law providing a framework for enforcing electric grid reliability standards. The law also provides for civil penalties of up to $1 million per violation per day, boosting FERC's enforcement efforts and helping to ensure reliability of the nation's bulk electric power grid.

"Today's settlement demonstrates the high priority the commission places on electric reliability ... in order to protect consumers," said Norman Bay, Director of the FERC's Office of Enforcement.

Florida Power, a subsidiary of FPL Group FPL.N, will pay $10 million to NERC to offset the budget charges it assesses industry members. The company also will pay $10 million to the U.S. Treasury and another $5 million for extra reliability enhancements for its system that go beyond the minimum requirements the company must follow.

The blackout was caused by a fault at a substation on the Florida Power system in west Miami that quickly cascaded through the system, disabling dozens of transmission lines around the state.

The company admitted the blackout was caused by human error when a field engineer was diagnosing a switch that had malfunctioned. Without authorization and against FPLs policies, the engineer disabled the primary and backup equipment that prevents electrical failures at a switch from spreading. Because both levels of protective equipment had been disabled, the blackout followed.

"We deeply regret the inconvenience this incident caused our customers and the communities we serve," said FPL President and CEO Armando Olivera.

However, he disagreed with FERC's claim that Florida Power committed violations and said the company was in compliance with industry reliability standards when the blackout occurred. Olivera said the company agreed to settle the matter with the agency to avoid years of costly litigation.

Florida Power also agreed to a broad program of remedial measures to enhance its system and operations to help prevent a similar blackout from happening again, the FERC said. (Reporting by Tom Doggett; Editing by Lisa Shumaker)