June 09, 2016

Their customers overpaid $6.6 billion in fuel bills, so utilities scale back failed hedging program

Under fire for overcharging Florida customers $6.6 billion in fuel costs since 2002, Florida's largest utilities agreed to reduce their fuel hedging program Thursday for the first time since the program began. 

The decision by the Florida Public Service Commission allows the company to reduce the program that allows them to lock in fuel prices in advance by 25 percent but regulators rejected calls to eliminate the failed program.

The program, known as fuel hedging, has been a bad bet for customers since it began in 2002 after significant fluctuations in natural gas and oil prices led to unexpected increases in customers' utility bills.

Over that time, Florida Power & Light, Duke Energy of Florida, Tampa Electric Co. and Gulf Power Co. locked in future fuel prices at high rates but then the market price dropped, leading customers to pay an estimated $6.6 billion more than the market costs.

In 2015, utilities charged customers $820 million more than the market cost for natural gas, according to PSC staff because of the hedging program and they are expected to lose another $560 million this year. FPL customers lost $504 million in hedging costs in 2015, Duke Energy of Florida customers lost $226 million, Gulf Power customers lost $50 million and Tampa Electric Co. customers lost $39 million.

The program was designed to allow companies to enter into fuel hedging contracts, essentially betting on a fixed price and agreeing to pay it whether the price rises or falls. The expectation was that the companies would offset the losses with gains when the price of natural gas rose.

But with the advent of new extraction technology, such as fracking, the price of natural gas has dropped in recent years and companies have overpaid on their fixed fuel costs.

Lawyers representing utility customers urged regulators to discontinue the hedging program but the utilities argued they should only be required to reduce the program by 25 percent.

"The suggestion by the utilities is putting a Band-Aid on a gaping gunshot wound and we would ask you to go further than what the utilities propose,'' said Jon Moyle of the Florida Industrial Power Users Group. "It's not working well for consumers. It's a big loser for consumers...Stop the bleeding."

"The cost of financial hedging activities still greatly outweigh any potential benefits that the companies may receive,'' said Eric Sailer of the Office of Public Counsel, which represents the public in utility matters.

Three PSC members said they would have preferred to see the company reduce the amount they hedge by 50 percent but innstead agreed to the utility's request and approved the 25 percent reduction nonetheless.

James Beasley of Tampa Electric said the utilities decided that reducing their hedging contracts by 25 percent seemed "a reasonable judgment call."

"We are hedging now for 2017 and we are already pretty deeply into it,'' said John Butler, lawyer for FPL.

Commissioner Art Graham applauded the utilities for coming forward with the proposal and said he had hoped they would have asked for 50 percent reduction.

"I know it's not easy for you to come together,'' he said. "Maybe we could have done more but overall this is better than not."

May 23, 2016

Utility regulators reject request from public's lawyers for more time in FPL rate case

Lisa Edgar via PSCThe Florida Public Service Commission offered a glimpse into how bitter, and potentially personal, the high stakes debate over Florida Power & Light's request to raise its rates $1.3 billion may become later this summer.

On Monday, the PSC voted unanimously to reject a request from the Office of Public Counsel, the lawyers who represent the public before regulators, who want more time to prepare their case.

The OPC had asked the panel to reconsider a May 4 order by hearing officer and PSC Commissioner Lisa Edgar who ruled that the public counsel would have just over four weeks - until May 31 - to file its testimony in two parts of the rate case. She gave FPL just over five weeks - until July 5 -- to file its rebuttal.

It was a timeframe that Public Counsel J.R. Kelly considered unprecedented, unworkable and unfair so, rather than file a motion with Edgar for more time, he and his staff asked for a full vote of the PSC.

It backfired.

Continue reading "Utility regulators reject request from public's lawyers for more time in FPL rate case" »

May 19, 2016

NextEra rejects call to report risk of sea level rise to its waterfront nuclear plants

NextEra EnergyIn a swift 17-minute meeting held in a Oklahoma City hotel Thursday, NextEra Energy successfully won shareholder approval of a $31 million compensation package for its five top executives, and defeated two proposals aimed at increasing transparency over how the company is handling sea level rise and political contributions.

"The company you own had a very strong 2015,'' declared NextEra president and CEO Jim Robo as he called the quick meeting to order at the Embassy Suites hotel in downtown Oklahoma city.

He is among the company’s five top executives who, shareholders agreed will be paid $31 million in performance pay and stock because of the company’s strong financial performance in the last year. Robo alone earned at least $15.2 million in compensation in 2015, according to the company proxy statement.

The Juno Beach-based company is the parent of Florida Power & Light and one of the nation's largest utility conglomerates. The audio cast of the annual meeting for company shareholders is available on the company’s web site.

Robo cited NextEra’s better than average reliability, its lower than average customers bills, its satisfaction among business customers, its acquisition of a Texas pipeline, and its expanding wind and solar market as evidence of “the whole company delivering outstanding financial performance for our shareholders.”

Robo did not make note of the troubles ahead, such as the federal and state orders for FPL to clean-up its leaking cooling canals in order to stop a plume of saltwater from migrating into South Florida’s drinking water supplies and leaking into Biscayne Bay or the resistance the company faces in its bid to purchase Hawaii Electric.

Robo recognized a representative for Coral Gables activist and NextEra shareholder, Alan Farago and his wife Lisa Versaci, to present their shareholder proposal to require the company to report each year on the risk its faces from sea-level rise, under a range of scenarios and according to the best available science.

Farago has argued that FPL's position as the supplier of electricity to Florida's east coast is "extraordinarily vulnerable to the financial disruptions of climate change."

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Supreme Court rejects Florida Power & Light's attempt to make customers pay for fracking

In a rebuke to Florida Power & Light, the Florida Supreme Court on Thursday ruled that state regulators exceeded their authority when they allowed the company to charge customers for its speculative investment into an Oklahoma-based fracking company.

In June of last year, the Public Service Commission rejected its staff recommendation and unanimously approved guidelines that gave FPL the right to charge its customers up to $500 million a year for speculative natural gas fracking activities without oversight from regulators for the next five years.

In a 6-1 opinion, written by Justice Ricky Polston, the court concluded that the PSC did not have statutory authority to authorize the charge and called its decision "overreach."

"Treating these activities as a hedge requires FPL’s end-user consumers to guarantee the capital investment and operations of a speculative oil and gas venture without the Florida Legislature’s authority," Polston wrote. Justice Charles Canady dissented with an opinion, arguing that the PSC did have the authority to allow the costs of the investment to be recovered under the FPL fuel clause.

Here's the ruling: Download SCOFLA Woodford case

The proposal, called the Woodford Gas Reserves Project, is a joint venture between FPL with Oklahoma-based PetroQuest Energy, Inc. which develops and operates the natural-gas wells. FPL has earned profit off the investment -- about 11.3 percent -- and claimed that it would provide a long-term hedge against volatile fuel costs and should therefore be charged to customers under its fuel cost-recovery clause. 

Update: As of April 30, 2016, FPL has recovered $21.9 million through the Fuel Clause related to the Woodford Project, the PSC said Friday. 

The court disagreed with FPL and ruled that the investment was a risk that should be charged to shareholders, not ratepayers. It said PSC's ability to allow FPL to recover costs "is permissible only for costs arising from the 'generation, transmission, or distribution' of electricity','' while "the exploration, drilling, and production of fuel falls outside the purview of an electric utility as defined by the Legislature."

"It is undisputed that FPL is an electric utility,'' Polston wrote. "It is also undisputed that the PSC’s ratemaking authority encompasses the authority to examine fuel cost expenditures and approve cost recovery to compensate for utilities’ fuel expenses through the fuel clause...However, the PSC does not have the statutory authority to approve cost recovery for FPL’s investment in the Woodford Project."

The court's ruling was hailed by the Office of Public Counsel, which represents the public before the PSC, the Florida Retail Federation, and the Florida Industrial Power Users Group, which opposed the PSC's decision because it gave FPL unprecedented permission to use ratepayer dollars to finance an energy exploration and production business.

"This is a great victory for ratepayers and will prevent them from having to bear the cost of some very speculative risk,'' said JR Kelly, the head of the Office of Public Counsel. 

FPL, a regulated monopoly and Florida's largest utility, entered into the $191 million joint venture with PetroQuest Energy of Oklahoma to explore for natural gas, including using a process known as hydraulic fracking. The process involves injecting large volumes of water, sand and chemicals at high pressures to release oil and natural gas from rock caverns deep underground.

FPL used the investment as a guaranteed new source of revenue that allowed it to increase its rate base in the face of increasing competition from solar and other alternative energy sources. As an investor-owned utility, the PSC allows FPL to earn a guaranteed profit -- return on investment -- of up to 11.5 percent of its rate base. By allowing the company to increase that by $750 million a year, FPL and its parent company, NextEra, were guaranteed higher profits.

The return on investment for customers, however. At its hearing on its fuel costs last year, FPL revealed that the Woodford project had customers about $5 million, rather than save them in fuel costs. 

According to an analysis by the PSC’s staff, FPL was the first utility in the nation to be allowed to use ratepayer money for such an “non-regulated risk.” 

The court called out that strategy as an inappropriate use of the fuel cost-recovery clause which is intended to be used to hedge against price swings.

"Permitting advance recovery of FPL’s investment in the Woodford Project’s exploration and production of natural gas will not pay for the costs of actual fuel,'' Polston wrote. "It will provide recovery, instead, for investment, operation, and maintenance and operation of assets that will provide access to an unknown quantity of fuel in the future."

The court said that because it "is impossible to know what the costs of the natural gas will be until it is actually produced. There is more uncertainty from this investment rather than less" and therefore the investment " cannot be characterized as a physical hedge."

Polston said that the Woodford Project "is a guaranteed capital investment for FPL; it is not a hedge to stabilize fuel costs."

Polston added that while the speculative capital investments in gas exploration and production by an electric utility "may be a good idea,'' whether it is in the public interest "is a policy determination that must be made by the Legislature."

Last year, the PSC staff drew a similar conclusion, which the PSC rejected, saying the project was untested, a risky investment in a volatile energy market, and had the potential to benefit FPL’s shareholders more than its customers.

Canady, however, disagreed, scolding the court's majority for overturning the PSC. 

"...the majority is merely substituting its judgment for the PSC’s judgment and expressing disagreement with the PSC’s factual findings,'' he wrote. "The testimony and exhibits presented at the evidentiary hearing provide competent, substantial evidence to support the PSC’s conclusion that the Woodford Project acts as a long-term physical hedge.

Kelly, the public counsel, said the next step will be “to go back and figure out how to undo the portion of the commission's order than the court has now overruled,’’ he said. “It will certainly come in the form of some refund to the FPL ratepayers.”

Bev DeMello, PSC spokeswoman, said Friday that "as with all costs recovered through the Fuel Clause, the final amount is subject to true-up.  The actual amount, if any, that FPL will be permitted to recover related to the Woodford Project will be the subject of an evidentiary hearing held in November."  


May 17, 2016

FPL delays nuclear expansion as it deals with canal clean-up, but wants to charge customers for expansion anyway

FPL salt at turkey point

Florida Power & Light has told state officials that it will put a four-year pause on its construction plans for two proposed nuclear power plants at its troubled Turkey Point site but it wants the state to waive the requirement that it show the project is still "feasible" in order to charge customers in advance for it. 

"The analysis would impose a substantial hardship upon FPL and violate principles of fairness," FPL wrote in an motion filed April 27 with the Florida Public Service Commission.

This week, the City of Miami, consumer groups, environmental advocates and some of the state's largest electric power users, urged utility regulators to reject that request, saying FPL should be required to justify whether it is allowed to continue charging customers for a project that may be on the skids.

"If a project is no longer feasible or practical, then the costs incurred are not prudent,'' wrote City of Miami attorney Victoria Mendez in a motion filed with the PSC on Tuesday. "...Since FPL plans to continue recovering costs pursuant to section 366.93 while doing no additional work towards the completion of the project, it is imperative that FPL demonstrate the project is still economically feasible and practical.'' 

Since 2008, FPL has charged customers $281 million for the planning and licensing costs of two new nuclear power units -- Units 6 and 7 -- at its Turkey Point site on Biscayne Bay. It now wants to be able to charge customers another $22 million in the coming year.

The co-called "nuclear cost recovery" fee has been controversial since lawmakers created it in 2006. In 2013, after Duke Energy customers spent more than $1.5 billion financing a failed nuclear project, the Florida Legislature revised the law to require utility companies to prove that a nuclear project is feasible before the Public Service Commission gives the company permission to move into the "preconstruction" phase of the project.

"This annual feasibility analysis serves to safeguard customers from potentially paying millions of dollars over numerous years on a project when the long-term feasibility analysis may show that it is no longer viable going forward, and, accordingly, may be abandoned,'' wrote the Florida Office of Public Counsel, which represents the public in rate cases in its motion filed Monday.

The future of FPL's planned nuclear expansion project has become inevitably tied to the clean-up of a massive underground salt water plume that is migrating towards South Florida's water supply. The plume is expected to have been caused by the utility company's 2013 nuclear plant expansion, intended to increase power output by 15 percent, which forced the canals to become dangerously warm. Story here. 

Continue reading "FPL delays nuclear expansion as it deals with canal clean-up, but wants to charge customers for expansion anyway" »

May 03, 2016

Jeffrey Bragg, rejected as insurance commissioner, applies for the Public Service Commission

Gov. Rick Scott's top choice to become insurance commissioner, Jeffrey S. Bragg, is among the 11 candidates who have applied to become Public Service Commissioner, the powerful board that regulates utilities.

Bragg, a Palm Harbor resident and former executive director of the U.S. Department of the Treasury's Terrorism Risk Insurance Program under Presidents George W. Bush and Barack Obama, previously applied to become insurance commissioner and was the governor's top choice. But his nomination was rejected by Chief Financial Officer Jeff Atwater, who preferred state Rep. Bill Hagar for the job, and their impasse led them to agree to an alternate, David Altmaire, a deputy insurance commissioner.

Reached by phone late Tuesday, Bragg would not say if he had been recruited for the powerful PSC post by the governor.

"I'm just looking for a good fit and hope this will be it,'' Bragg told the Herald/Times. "I do want to get back in the game in some meaningful way." 

The post is being vacated by for the position being vacated by Lisa Edgar, the longest serving member of the PSC who confirmed Tuesday that she will not seek a fourth term to the commission. She served three four-year terms and had been appointed by Govs. Jeb Bush, Charlie Crist and Rick Scott

The other candidates applying to fill Edgar's post include: Johnnie E. Cooper. John R. Coleman, Albert E. Martin, Dennis E. Shannon, Jeffrey S. Foster, Cynthia J. Wilson Orndoff, Donald J. Polmann, Thomas P. Brantley, Stuart W. Pollins and Todd N. Chase. No additional information was made available late Tuesday. 

The Public Service Commission Nominating Council, a 12-member panel controlled by legislators, will interview the candidates in Tallahassee on Thursday and recommend three names to be submitted to the governor. Scott will then select his appointee from the list. 

Times report Steve Bousquet contributed to this report. 

Here is Edgar's statement: 

Continue reading "Jeffrey Bragg, rejected as insurance commissioner, applies for the Public Service Commission" »

April 26, 2016

After waiting years, state cites FPL for threatening drinking water, wants clean-up plan in 60 days

FPL salt at turkey point

via @JenStaletovich


Days after issuing a controversial plan for managing the troubled cooling canal system at Turkey Point, state environmental officials have cited Florida Power & Light for threatening nearby drinking water supplies and ordered the utility to hammer out a fix to stop the spread of an underground plume of saltwater.

In a notice to FPL officials Monday, the Department of Environmental Protection gave the utility 21 days to provide any information about how the 40-year-old canals have seeped into the Biscayne aquifer over the years and enter negotiations to come up with a clean-up plan. If the two sides fail to agree, the agency may come up with its own measures in 60 days, the notice said.

DEP Water Resource Management Director Frederick Aschauer also warned FPL that a new problem — in March Miami-Dade County detected canal water in Biscayne Bay — may be violating other state laws, for which the utility may be liable for damages. Aschauer gave FPL 15 days to set up a meeting.

The two notices come years late for critics, who say there has long been compelling evidence that the massive one-of-a-kind cooling canal system was degrading water quality far beyond the borders of the nuclear power plant along southern Biscayne Bay.

After DEP signed off on a December 2014 uprating project that expanded power output from the plant’s twin reactors, rock miner Steve Torcise, Tropical Audubon and neighboring cities including Miami sued, saying state regulators did too little to address a growing underground plume that has pushed saltwater inland about four miles. An administrative judge in February agreed, faulting DEP for not citing the agency for violations and ordering state officials to redo the plan.

Last week, the Miami Herald reported that FPL knew about super salty canal water pushing inland since at least 2010 when it conducted its own in-house study. The study found adding fresh water alone, a fix FPL sought repeatedly as canals grew hotter after the expansion, would likely worsen the plume.

More here. 


January 15, 2016

Update: FPL seeks 24 percent increase in electric rates; public counsel vows to fight it

Florida Power & Light on Friday asked the Public Service Commission to allow it to raise rates on 4.8 million Florida customers by 23.7 percent by 2019, a $1.3 billion increase that is also designed to reward its shareholders with substantially higher profits.

FPL argues that while it has delivered stable and low-cost power to customers since its last rate case in 2009, it must charge customers more to offset the increase in expenses and accommodate the growth in population.

“We are committed to delivering our customers exceptional value for their money and will continue to make smart investments that will further improve service for customers and help keep costs down,'' said Eric Silagy, FPL president and CEO, in a press release.  Download 2016 Rate Proceeding - News Release (TYL) - FINAL

If approved, the increase will lock in base rates for four years and the typical residential customer bill of 1,000 kilowatt hours would increase by about $13 a month — with $8.50 imposed in 2017, another $2.50 in 2018 and $2 more in 2019. The current base rate imbedded within a customer’s overall bill is $54.86 per 1,000 kwh. Other charges are added to every bill, and the current total for 1,000 kwh is $93.38.

The request comes on the heels of the company spending more than $3.4 million in campaign funds to stave off competition from the solar industry by mounting a campaign to keep a constitutional amendment off the November ballot that would have opened the door to a competitive solar market in Florida.

The PSC has the final say over the rate request but the current panel of governor-appointed commissioners has consistently-sided with FPL on its controversial requests. The company is the third largest utility in the nation and one of the most active campaign contributors in the state.

Despite that record, J.R. Kelly, the lawyer who represents ratepayers in utility cases, said Friday he will "fight the good fight" and argue that FPL's rate hike should be rejected. FPL is earning profits at the top end of the rate allowed under the current agreement with the state, and Kelly said, the company can afford to make the investments it needs to continue to operate an efficient and reliable system without a rate increase..

"I  know why they want the money. They want to continue to earn all they can for their shareholders and earn at the top of their range,'' Kelly said. "If  they are earning like that, they don't need that $1 billion."

Under state law, the utility is allowed to earn a return on equity of between 9.5 percent and 11.5 percent without having to justify its profits before regulators. Kelly said for every 100 basis points, or each percentage point of ROE, FPL earns about $165 million in profit.

Continue reading "Update: FPL seeks 24 percent increase in electric rates; public counsel vows to fight it" »

August 13, 2015

Consumer advocate asks court to reverse FPL gas fracking fee

Florida's consumer advocate in utility cases said Thursday he will ask the state Supreme Court to reverse a decision by state regulators to allow Florida Power & Light to charge customers for exploratory drilling for natural gas. 

The Florida Public Service Commission last December gave approval to FPL's plan to ask customers to finance a venture into the controversial natural gas fracking business in Oklahoma. FPL  plans to invest $191 million in a joint venture with PetroQuest Energy, Inc.

In July, regulators gave FPL permission to enter into agreements with other gas fracking companies and charge customers for their investment of up to $500 million a year, without seeking regulatory approval.   

FPL argues the investments will help stabilize volatile future energy costs, saving customers about $100 million over 30 years or two cents a month for the average 1,000-kilowatt-hour bill.

But the Office of Public Counsel, which represents the public in utility rate cases, as well as the Florida Industrial Power Users Group, oppose the ruling and each filed a notice of appeal with the high court.

They argue there is no guarantee that the risk of shouldering the costs gas drilling in an uncertain regulatory environment will produce benefits for ratepayers. They also say the decision gives the state’s largest utility unprecedented permission to use ratepayer dollars to finance an energy exploration and production.

The PSC overruled its own staff when it approved the FPL request, allowing the company to become the the nation’s first utility to use ratepayer money for what the staff called a “non-regulated risk.”

June 18, 2015

PSC rejects staff, sides with FPL, votes to have ratepayers finance fracking projects

Millions of homes and businesses who are customers of Florida Power & Light will be financing as much as $500 million a year in unregulated natural gas fracking projects conducted by the state’s largest utility, state regulators decided Thursday. 

The Florida Public Service Commission sided with FPL and against consumer advocates and unanimously approved guidelines that give the company carte blanche approval to charge its customers for natural gas fracking and “wildcatting” activities without oversight from regulators for the next five years.

The decision gives the state largest utility company unprecedented permission to use ratepayer dollars to finance an energy exploration and production business. According to an analysis by the PSC’s staff, FPL will be the first utility in the nation to be allowed to use ratepayer money for such an “non-regulated risk.”

FPL spokesman Mark Bubriski disputed the characterization that the projects are not regulated, arguing that the guidelines "nsure the PSC has the power to monitor project costs through the required independent audit."

But PSC spokeswoman Cindy Muir said that while FPL will now "have the opportunity to recover non-regulated investments through regulated rates...this should not be considered regulation." 

The decision also gives the company, a regulated monopoly, a guaranteed new source of revenue that will allow it to increase its rate base for the next several years in the face of increasing competition from solar and other alternative energy sources.

Continue reading "PSC rejects staff, sides with FPL, votes to have ratepayers finance fracking projects" »