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.

As an investor-owned utility, the PSC allows FPL to earn a guaranteed profit -- return on investment -- of 10.25 percent of its rate base. By allowing the company to now increase that by $500 million a year, FPL and its parent company, NextEra, is guaranteed higher profits

The commission rejected a strongly-worded staff recommendation that urged regulators to reject FPL’s request, 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.

While commissioners supported FPL’s request, they concluded that the unprecedented nature of the new venture called for a review after five years, but not before three years of operation. They also required the company to have its costs related to the projects to be reviewed by an independent auditor.

“I want for there to be a decision and not for this to have a life of its own,’’ said Commission Chairman Art Graham. “Because there is so much unknown we will review and either continue the status quo or tweak left or right.”

The commission also agreed to limit the percentage FPL relies on the natural gas from the projects to between 5 and 10 percent of their “average daily burn.”

“These are long-term projects,’’ said Commissioner Jimmy Patronis said. “Permitting doesn’t happen overnight.”

FPL commended the PSC’s “thoughtful approach to our proposal” and said it would result in “savings for our customers.”

“The U.S. natural gas market is growing and fast-paced, and potential partners are unwilling to wait through a lengthy regulatory process before moving forward, which makes the Commission’s approval of guidelines so important,’’ Bubriski said. “We can now seek out potential future projects to benefit our customers without unnecessary delays.”

The proposal was opposed by the Office of Public Counsel, the lawyers who represent the public in utility rate cases, as well as the state’s largest industrial energy users, the Florida Retail Federation and several environmental groups.

"We are disappointed with the commission's decision that puts FPL's ratepayers -- nearly half of the businesses and residents of the state -- squarely in the risky business of natural gas exploration, drilling and production,'' said Jon Moyle, a lawyer for the Florida Industrial Power Users Group, which opposed the proposal.

In December, the PSC gave FPL approval to enter into a $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 not only asked to expand on that investment, known as the Woodford project, and engage in other gas drilling projects but it wanted the authority to move forward without getting approval from regulators using up to $750 million a year in ratepayer money.

At the recommendation of Commissioner Lisa Edgar, the PSC lowered the authorized amount to $500 million a year.

 

 

As an investor-owned utility, the PSC allows FPL to earn a guaranteed profit -- return on investment -- of 10.25 percent of its rate base. By allowing the company to now increase that by $500 million a year, FPL and its parent company, NextEra, is guaranteed higher profits

The commission rejected a strongly-worded staff recommendation that urged regulators to reject FPL’s request, 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.

While commissioners supported FPL’s request, they concluded that the unprecedented nature of the new venture called for a review after five years, but not before three years of operation. They also required the company to have its costs related to the projects to be reviewed by an independent auditor.

“I want for there to be a decision and not for this to have a life of its own,’’ said Commission Chairman Art Graham. “Because there is so much unknown we will review and either continue the status quo or tweak left or right.”

The commission also agreed to limit the percentage FPL relies on the natural gas from the projects to between 5 and 10 percent of their “average daily burn.”

“These are long-term projects,’’ said Commissioner Jimmy Patronis said. “Permitting doesn’t happen overnight.”

FPL commended the PSC’s “thoughtful approach to our proposal” and said it would result in “savings for our customers.”

“The U.S. natural gas market is growing and fast-paced, and potential partners are unwilling to wait through a lengthy regulatory process before moving forward, which makes the Commission’s approval of guidelines so important,’’ Bubriski said. “We can now seek out potential future projects to benefit our customers without unnecessary delays.”

The proposal was opposed by the Office of Public Counsel, the lawyers who represent the public in utility rate cases, as well as the state’s largest industrial energy users, the Florida Retail Federation and several environmental groups.

"We are disappointed with the commission's decision that puts FPL's ratepayers -- nearly half of the businesses and residents of the state -- squarely in the risky business of natural gas exploration, drilling and production,'' said Jon Moyle, a lawyer for the Florida Industrial Power Users Group, which opposed the proposal.

In December, the PSC gave FPL approval to enter into a $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 not only asked to expand on that investment, known as the Woodford project, and engage in other gas drilling projects but it wanted the authority to move forward without getting approval from regulators using up to $750 million a year in ratepayer money.

At the recommendation of Commissioner Lisa Edgar, the PSC lowered the authorized amount to $500 million a year.