This discussion should be read in conjunction with the Notes contained herein and Management's Discussion and Analysis of Financial Condition and Results of Operations (Management's Discussion) appearing in the 2008 Form 10-K for FPL Group and FPL. The results of operations for an interim period generally will not give a true indication of results for the year. In the following discussion, all comparisons are with the corresponding items in the prior year period.

Results of Operations

FPL Group and NextEra Energy Resources segregate into two categories unrealized mark-to-market gains and losses on energy derivative transactions which are used to manage commodity price risk. The first category, referred to as trading activities, represents the net unrealized effect of actively traded positions entered into to take advantage of market price movements and to optimize the value of generation assets and related contracts. The second category, referred to as non-qualifying hedges, represents the net unrealized effect of derivative transactions entered into as economic hedges but which do not qualify for hedge accounting and the ineffective portion of transactions accounted for as cash flow hedges. At FPL, substantially all changes in the fair value of energy derivative transactions are deferred as a regulatory asset or liability until the contracts are settled, and, upon settlement, any gains or losses are passed through the fuel clause or the capacity clause.

FPL Group's management uses earnings excluding certain items (adjusted earnings) internally for financial planning, for analysis of performance, for reporting of results to the Board of Directors and as inputs in determining whether performance targets are met for performance-based compensation under FPL Group's employee incentive compensation plans. FPL Group also uses adjusted earnings when communicating its earnings outlook to investors. Adjusted earnings exclude the unrealized mark-to-market effect of non-qualifying hedges and other than temporary impairment (OTTI) losses on securities held in NextEra Energy Resources' nuclear decommissioning funds, net of the reversal of previously recognized OTTI losses on securities sold and losses on securities where price recovery was deemed unlikely (collectively, OTTI reversals). FPL Group's management believes adjusted earnings provide a more meaningful representation of the company's fundamental earnings power. Although the excluded amounts are properly included in the determination of net income in accordance with generally accepted accounting principles, management believes that the amount and/or nature of such items make period to period comparisons of operations difficult and potentially confusing. Adjusted earnings does not represent a substitute for net income, as prepared in accordance with generally accepted accounting principles.

In March 2009, FPL, certain subsidiaries of NextEra Energy Resources and certain nuclear plant joint owners signed a settlement agreement (spent fuel settlement agreement) with the U.S. Government agreeing to dismiss with prejudice lawsuits filed against the U.S. Government seeking damages caused by the U.S. Department of Energy's failure to dispose of spent nuclear fuel from FPL's and NextEra Energy Resources' nuclear plants. As a result of the spent fuel settlement agreement, in the first quarter of 2009 FPL Group reduced its property, plant and equipment balances by $107 million ($83 million for FPL) and operating expenses by $15 million ($12 million for FPL) and increased operating revenues by $9 million. The spent fuel settlement agreement increased FPL Group's first quarter 2009 net income by approximately $16 million ($9 million for FPL). The amount received from the U.S. Government related to property, plant and equipment is included in cash flows from investing activities on FPL Group's and FPL's condensed consolidated statements of cash flows. Through September 30, 2009, FPL Group has collected approximately $124 million ($82 million for FPL) of the amount due from the U.S. Government and has paid approximately $23 million ($5 million for FPL) to the joint owners of certain of its nuclear plants. An additional payment of approximately $30 million ($18 million for FPL) from the U.S. Government is pending. FPL and NextEra Energy Resources will continue to pay fees to the U.S. Government's nuclear waste fund.

Summary - Presented below is a summary of net income (loss) by reportable segment (see Note 11):

                                Three Months Ended                     Nine Months Ended
                                   September 30,                         September 30,
                                               Increase                                Increase
                          2009      2008      (Decrease)       2009        2008      (Decrease)
                                                        (millions)

FPL                        $ 306     $ 314      $       (8 )   $   646     $   638       $       8
NextEra Energy Resources     233       483            (250 )       671         650              21
Corporate and Other           (6 )     (23 )            17         (50 )       (56 )             6
FPL Group Consolidated     $ 533     $ 774      $     (241 )   $ 1,267     $ 1,232       $      35

The decrease in FPL's results for the three months ended September 30, 2009 is primarily due to the impact of income tax adjustments and higher operations and maintenance (O&M) and depreciation expenses partly offset by a base rate increase resulting from WCEC Unit No. 1 commencing commercial operation in August 2009, higher equity component of AFUDC (AFUDC - equity) and higher customer usage. The increase for the nine-month period reflects higher AFUDC - equity, a base rate increase resulting from WCEC Unit No. 1 commencing commercial operation in August 2009, lower O&M expenses and the spent fuel settlement agreement, partly offset by lower retail customer usage, the impact of income tax adjustments and higher depreciation expense.

NextEra Energy Resources' results for the three and nine months ended September 30, 2009 reflect additional earnings from new investments, favorable margins from NextEra Energy Resources' retail energy provider, a higher contribution from full energy and capacity requirements services and trading and convertible ITCs tax benefits (see Note 5) and, for the nine-month period, the absence of planned and unplanned outages at the Seabrook nuclear facility, foreign and state tax benefits (see Note 5) and the spent fuel settlement agreement. These results were partially offset by unfavorable market conditions in the Electric Reliability Council of Texas (ERCOT) region and, during the nine-month period, lower generation due to a lower wind resource and a refueling outage at the Duane Arnold nuclear facility. In addition, interest expense and corporate administrative and general expenses for the three- and nine-month periods were higher to support growth of the business. FPL Group's and NextEra Energy Resources' net income for the three months ended September 30, 2009 reflects net unrealized mark-to-market after-tax losses from non-qualifying hedges of $32 million while in the prior period net income reflects $285 million of after-tax gains from such hedges. FPL Group's and NextEra Energy Resources' net income for the nine months ended September 30, 2009 reflects net unrealized mark-to-market after-tax losses from non-qualifying hedges of $33 million while the prior period net income reflects $76 million of after-tax gains from such hedges. The change in unrealized mark-to-market activity is primarily attributable to changes in forward power and natural gas prices, as well as the reversal of previously recognized unrealized mark-to-market gains/losses as the underlying transactions are realized. As a general rule, a gain (loss) in the non-qualifying hedge category is offset by decreases (increases) in the fair value of related physical asset positions in the portfolio or contracts, which are not marked to market under generally accepted accounting principles. For the three months ended September 30, 2008, NextEra Energy Resources recorded $17 million of after-tax OTTI losses on securities held in NextEra Energy Resources' nuclear decommissioning funds. For the three months ended September 30, 2009, NextEra Energy Resources had approximately $3 million of after-tax OTTI reversals. There were no OTTI reversals for the three months ended September 30, 2008. For the nine months ended September 30, 2009 and 2008, NextEra Energy Resources recorded $33 million and $29 million, respectively, of after-tax OTTI losses on securities held in NextEra Energy Resources' nuclear decommissioning funds. For the nine months ended September 30, 2009, NextEra Energy Resources had approximately $7 million of after-tax OTTI reversals; there were no such OTTI reversals for the nine months ended September 30, 2008.

The improvement in results for Corporate and Other for the three-month period is primarily due to favorable consolidating income tax adjustments. The improvement in results for the nine-month period is primarily due to higher interest income partly offset by unfavorable consolidating income tax adjustments.

FPL - FPL's net income for the three months ended September 30, 2009 and 2008 was $306 million and $314 million, respectively, a decrease of $8 million. FPL's net income for the nine months ended September 30, 2009 and 2008 was $646 million and $638 million, respectively, an increase of $8 million. The decrease for the three months ended September 30, 2009 is primarily due to the impact of income tax adjustments and higher O&M and depreciation expenses partly offset by a base rate increase resulting from WCEC Unit No. 1 commencing commercial operation in August 2009, higher AFUDC - equity and higher customer usage. The increase for the nine-month period reflects higher AFUDC - equity, a base rate increase resulting from WCEC Unit No. 1 commencing commercial operation in August 2009, lower O&M expenses and the spent fuel settlement agreement, partly offset by lower retail customer usage, the impact of income tax adjustments and higher depreciation expense.

In March 2009, FPL filed a petition with the FPSC requesting, among other things, a permanent increase in base rates and charges effective January 2010 and an additional permanent base rate increase effective January 2011. To address the addition of FPL's WCEC Unit No. 3 and any subsequent power plant additions, FPL is also requesting FPSC approval to continue the GBRA mechanism previously approved by the FPSC as part of the stipulation and settlement agreement regarding FPL's 2005 base rate case. If approved, the requested permanent base rate increases would increase annual retail base revenues by approximately $1 billion in 2010 and an additional $250 million in 2011. FPL's requested increases are based on a regulatory return on common equity of 12.5% and exclude amounts associated with the proposed extension of the GBRA mechanism and certain proposed cost recovery clause adjustments. FPSC hearings on this base rate proceeding concluded in October 2009 and a final decision is scheduled for January 2010. Although FPL cannot predict the ultimate outcome of the rate proceeding, FPL believes it is likely that the final decision may approve rates and other terms that are different from those that FPL has requested. A final decision that approves rates that are significantly less than those that FPL requested could materially impact the future results and growth prospects of FPL Group and FPL. The 2005 rate agreement and its provisions will terminate on the date new retail base rates become effective, which is expected to be no earlier than February 28, 2010.

FPL's operating revenues consisted of the following:

                                              Three Months Ended            Nine Months Ended
                                                 September 30,                September 30,
                                              2009           2008           2009          2008
                                                                 (millions)

Retail base                                $    1,123      $   1,098     $    2,882     $   2,908
Fuel cost recovery                              1,734          1,840          4,505         4,631
Net deferral of retail fuel revenues             (122 )            -           (146 )           -
Other cost recovery clauses and
pass-through costs, net of any deferrals          514            432          1,348         1,139
Other, primarily pole attachment
rentals, transmission and wholesale
sales and customer-related fees                    52             53            149           151
Total                                      $    3,301      $   3,423     $    8,738     $   8,829

For the three months ended September 30, 2009, a decrease in the average number of retail customers of 0.2% decreased retail base revenues by approximately $2 million while a 0.6% increase in usage per retail customer, primarily reflecting warmer weather partly offset by other factors, increased retail base revenues by $8 million. For the nine months ended September 30, 2009, a decrease in the average number of retail customers of 0.3% decreased retail base revenues by approximately $9 million while a 1.9% decrease in usage per retail customer, primarily reflecting factors other than weather conditions partly offset by warmer weather, decreased retail base revenues by $36 million. In addition, a base rate increase resulting from WCEC Unit No. 1 commencing commercial operation in August 2009 increased retail base revenues for both the three and nine months ended September 30, 2009 by approximately $19 million. The decline FPL experienced in the average number of retail customers in the fourth quarter of 2008 as well as a continued decline in non-weather related retail customer usage, which FPL believes is reflective of the economic slowdown and housing crisis that has affected the country and the state of Florida, has continued into 2009. FPL is unable to predict whether growth in customers and non-weather related customer usage will return to previous trends. The decline in retail customer usage for the nine months ended September 30, 2009 also reflects one less day of sales in 2009, as 2008 was a leap year.

FPL expects that retail base revenues will increase approximately $65 million in 2009, or approximately $265 million on an annualized basis, when retail base rates are changed pursuant to the GBRA mechanism to reflect the placements in service of WCEC Unit No. 1, which occurred in August 2009, and WCEC Unit No. 2, which is expected to occur in the fourth quarter of 2009. These additional units are expected to realize significant fuel savings from the time the units are placed in service.

Revenues from fuel and other cost recovery clauses and pass-through costs, such as franchise fees, revenue taxes and storm-related surcharges, do not significantly affect net income; however, underrecovery or overrecovery of such costs can significantly affect FPL Group's and FPL's operating cash flows. Fluctuations in fuel cost recovery revenues are primarily driven by changes in fuel and energy charges which are included in fuel, purchased power and interchange expense in the condensed consolidated statements of income, as well as by changes in energy sales. Fluctuations in revenues from other cost recovery clauses and pass-through costs are primarily driven by changes in storm-related surcharges, capacity charges, franchise fee costs, the impact of changes in O&M expenses and depreciation expenses on the underlying cost recovery clause, as well as changes in energy sales. Capacity charges and franchise fee costs are included in fuel, purchased power and interchange and taxes other than income taxes, respectively, in the condensed consolidated statements of income.

FPL uses a risk management fuel procurement program which was approved by the FPSC at the program's inception. The FPSC reviews the program activities and results for prudence on an annual basis as part of its annual review of fuel costs. The program is intended to manage fuel price volatility by locking in fuel prices for a portion of FPL's fuel requirements; any resulting gains or losses are passed through the fuel clause. The current regulatory asset for the change in fair value of derivative instruments used in the fuel procurement program amounted to approximately $344 million and $1,109 million at September 30, 2009 and December 31, 2008, respectively. The decrease in fuel revenues for the three months ended September 30, 2009 reflects approximately $120 million attributable to a lower average fuel factor partly offset by $14 million attributable to higher energy sales. The decrease in fuel revenues for the nine months ended September 30, 2009 reflects approximately $102 million attributable to lower energy sales and $24 million related to a lower average fuel factor. At September 30, 2009, approximately $146 million of retail fuel revenues were deferred pending refund to retail customers in a subsequent period. The increase from December 31, 2008 to September 30, 2009 in deferred clause and franchise revenues and the decrease in deferred clause and franchise expenses (current and noncurrent, collectively) on FPL Group's and FPL's condensed consolidated balance sheets totaled approximately $417 million and positively affected FPL Group's and FPL's cash flows from operating activities for the nine months ended September 30, 2009. The increase in revenues from other cost recovery clauses and pass-through costs for both the three- and nine-month periods is primarily due to additional revenues associated with the nuclear cost recovery rule.

The major components of FPL's fuel, purchased power and interchange expense are as follows:

                                              Three Months Ended            Nine Months Ended
                                                 September 30,                September 30,
                                              2009           2008           2009          2008
                                                                 (millions)

Fuel and energy charges during the
period                                     $    1,626      $   2,011     $    4,143     $   5,089
Net collection of previously deferred
retail fuel costs                                   -              -            256             -
Net deferral of retail fuel costs                   -           (166 )            -          (434 )
Other, primarily capacity charges net of
any capacity deferral                             160            147            411           392
Total                                      $    1,786      $   1,992     $    4,810     $   5,047

The decrease in fuel and energy charges for the three months ended September 30, 2009 reflects lower fuel and energy prices of approximately $396 million partly offset by $11 million attributable to higher energy sales. The decrease in fuel and energy charges for the nine months ended September 30, 2009 reflects lower fuel and energy prices of approximately $860 million and $86 million attributable to lower energy sales.

FPL's O&M expenses increased $36 million for the three months ended September 30, 2009 primarily due to higher pass-through costs which did not significantly affect net income. In addition, employee benefit costs, primarily medical, increased $11 million. FPL's O&M expenses decreased $6 million for the nine months ended September 30, 2009 reflecting lower nuclear generation, fossil generation and distribution costs of approximately $21 million, $13 million and $19 million, respectively. The decline in nuclear generation costs for the nine months ended September 30, 2009 reflects a reimbursement of costs related to the spent fuel settlement agreement, as well as lower costs related to plant improvement initiatives and refueling and maintenance outages. The decline in fossil generation costs is primarily due to differences in the timing of plant overhauls which are expected to occur later this year. The decline in distribution costs reflects lower support costs. These decreases in O&M expenses were partly offset by higher medical and other employee benefit costs of approximately $25 million, and by higher pass-through costs which did not significantly affect net income. Management expects O&M expenses in 2009 to exceed the 2008 level, primarily due to the absence of an environmental insurance policy termination which occurred in the fourth quarter of 2008, as well as higher expected nuclear, fossil generation, transmission, customer service, information management and other support costs and employee benefit costs.

Depreciation and amortization expense for the three and nine months ended September 30, 2009 increased $60 million and $161 million, respectively, reflecting the amortization of approximately $51 million and $145 million, respectively, of pre-construction costs associated with FPL's planned nuclear units recovered under the nuclear cost recovery rule, higher depreciation on transmission and distribution facilities (collectively, approximately $6 million and $16 million, respectively) and depreciation of $3 million on WCEC Unit No. 1, which was placed in service in August 2009.

The decline in interest expense for the three and nine months ended September 30, 2009 is primarily due to a decline in average interest rates of approximately 25 basis points and 32 basis points, respectively, partly offset by higher average debt balances. The decline in interest expense also reflects a higher debt component of AFUDC. The increase in AFUDC - equity for the three and nine months ended September 30, 2009 is primarily attributable to additional AFUDC - equity on three natural gas-fired combined-cycle units of approximately 1,220 mw each at FPL's WCEC in western Palm Beach County, Florida. AFUDC - equity on WCEC Unit No. 1 ceased in August when the unit went into commercial operation. The decline in interest income reflects lower average investment balances and lower average interest rates. The increase in FPL's effective income tax rate for the three and nine months ended September 30, 2009 reflects certain income tax expenses recorded this year and the absence of certain income tax benefits recorded last year.

FPL is currently constructing two additional natural gas-fired units at its WCEC, which are expected to be placed in service in the fourth quarter of 2009 and in mid-2011, respectively. In addition, FPL is in the process of adding approximately 400 mw of baseload capacity at its existing nuclear units at St. Lucie and Turkey Point, which additional capacity is projected to be placed in service by the end of 2012. In 2008, the FPSC approved FPL's plan to modernize its Cape Canaveral and Riviera power plants to high-efficiency natural gas-fired units. Each modernized plant is expected to provide approximately 1,200 mw of capacity and be placed in service by 2013 and 2014, respectively. Final project approval for the Cape Canaveral power plant was received in October 2009; final project approval for the Riviera power plant is expected in late November 2009. In October 2009, the FPSC did not approve FPL's need petition for an approximately 300-mile underground natural gas pipeline in Florida and instead asked FPL to redevelop a proposal in order to proceed. The natural gas pipeline was intended to supply natural gas to the Cape Canaveral and Riviera power plants following modernization. FPL is currently evaluating its options.

In 2008, the FPSC approved FPL's need petition for two additional nuclear units at its Turkey Point site with projected in-service dates between 2018 and 2020. The two units combined are expected to add approximately 2,200 mw of baseload capacity. Additional approvals from other regulatory agencies will be required later in the development process. In 2009, FPL began recovering under the capacity clause, in accordance with the FPSC's nuclear cost recovery rule, pre-construction costs associated with the planned nuclear units and carrying charges (equal to the pretax AFUDC rate) on construction costs associated with the addition of approximately 400 mw of baseload capacity at its existing nuclear units. Substantially all of these costs are subject to a prudence review by the FPSC. The same rule provides for the recovery of construction costs, once the new capacity goes into service, through a base rate increase.

NextEra Energy Resources - NextEra Energy Resources' net income for the three months ended September 30, 2009 and 2008 was $233 million and $483 million, respectively, a decrease of $250 million. NextEra Energy Resources' net income for the nine months ended September 30, 2009 and 2008 was $671 million and $650 million, respectively, an increase of $21 million. The primary drivers, on an after-tax basis, of these changes were as follows:

                                                  Increase (Decrease) From Prior Period
                                             Three Months Ended           Nine Months Ended
                                             September 30, 2009           September 30, 2009
                                                                (millions)

New investments (a)                            $           39               $          135
Existing assets (a)                                         2                          (39 )
Full energy and capacity requirements
services and trading                                       11                           40
Asset sales                                                 6                            9
Interest expense, differential
membership costs and other                                (11 )                        (18 )
Change in unrealized mark-to-market
non-qualifying hedge activity (b)                        (317 )                       (109 )
Change in OTTI losses on securities
held in nuclear decommissioning funds,
net of OTTI reversals                                      20                            3
Net income increase (decrease)                 $         (250 )             $           21

¾¾¾¾¾¾¾¾¾¾
(a) Includes PTCs and ITCs on wind projects and ITCs on solar projects and, for new investments, tax benefits from convertible ITCs under the Recovery Act (see Note 5) but does not include allocation of interest expense or corporate general and administrative expenses. Results from new projects are included in new investments during the first twelve months of operation. A project's results are included in existing assets beginning with the thirteenth month of operation.
(b) See Note 2 and discussion above related to derivative instruments.

The increase in NextEra Energy Resources' results from new investments reflects the addition of over 1,170 mw of wind generation during or after the three months ended September 30, 2008 and over 1,560 mw of wind generation during or after the nine months ended September 30, 2008. In addition, results from new investments for the three months ended September 30, 2009 include the convertible ITCs tax benefit and for the nine months ended September 30, 2009 include the state and convertible ITCs tax benefits (see Note 5). During the three-month period, results from NextEra Energy Resources' existing asset portfolio increased primarily due to favorable commodity margins from NextEra Energy Resources' retail energy provider, partially offset by unfavorable market conditions in the ERCOT region. During the nine-month period, results from NextEra Energy Resources' existing asset portfolio decreased primarily due to unfavorable market conditions in the ERCOT region and lower wind generation due to a lower wind resource partially offset by favorable commodity margins from NextEra Energy Resources' retail energy provider, the absence of outages at the . . .