Florida Panel Backs Merchant Plant Development
A special commission formed by Florida Gov. Jeb Bush is
recommending the state break up its monopoly utilities and pave the
way for competition in the power generation market by doing away
with certain laws and amending others.
The Florida Energy 2020 Study Commission approved a plan that
would result in a "systematic transition to a competitive wholesale
market, but [would be] designed to avoid the problems experienced
in California." The plan, which is expected to be submitted to the
Florida legislature next month, recommends the removal of statutory
barriers to entry for merchant power plants and provides a
transition to a "level playing field" for all generation assets.
Investor-owned utilities in the state would be required to spin
down generation assets at book value to an affiliate. They also
would be required to buy their power through a competitive
acquisition process, including bilateral agreements, RFPs,
short-term spot purchases and a variety of other methods.
Commission members took great pains to point out the differences
between what they are proposing and California's recipe for power
failure. Unlike California's utilities, Florida's utilities will
not be forced to rely only on the spot market for their power
However, Florida does face a potential power shortage.
Commission Chairman Walter Revell echoed the concerns of the
state's governor that Florida faces a significant increase in power
demand over the next decade or two and needs to remove barriers to
generation plant developers.
The latest estimates show that Florida will need 11,000 MW of
additional power generation in the next eight or nine years to meet
rapidly growing demand.
"There's definitely a need to get generation on the ground there
and I think by opening up the wholesale market to the merchant
facilities that you can put Florida in the position to have enough
generation to meet [its] needs as [it moves] forward with total
deregulation," said Duke Energy spokesman Rick Rhodes.
The Florida Supreme Court last year ruled against Duke Energy's
New Smyrna Beach merchant generation project, a decision that
effectively stopped dozens of proposed merchant power projects in
Florida's wholesale power market is basically closed to
competitors because its power plant siting laws state that
wholesale generation plant developers cannot be "applicants"
without a "determination of need," which the state Supreme Court
interpreted last April as meaning "fully committed" to serving
retail customers in the state.
To remove the barriers to entry, the Florida Energy 2020 Study
Commission's plan recommends changes to the "need determination
statute" and the Power Plant Siting Act. Last May, Bush ordered the
formation of the commission to determine the power needs of the
state over the next 20 years and to provide recommendations to the
legislature on how to serve those needs in the most efficient and
The commission's plan also would involve changes to Chapter 366
of the Florida statutes to allow the utilities to transfer existing
generation assets out of their rate bases and to allow them to buy
power as specified in the plan. Statutory changes also are needed
to smooth the way for the formation of GridFlorida, the regional
transmission organization that is being set up by the state's
utilities next year. The commission also recommends that ratepayers
be protected from any adverse impacts from restructuring by a
three-year rate freeze.
"It's a good first step," said Duke's Rhodes. "We were at the
table several times and were asked to provide input from a
developer's side. We'd like to commend Walter Revell and his staff.
This is a good package. We feel pretty confident that the
recommendations in the package are directionally correct and the
interests of the consumers are being well represented" so it should
move through the legislature. "The ball has been punted. I would
think it would be one of the first issues [the legislature]
tackles," he added. "It's an issue that affects every consumer in
Rhodes said Duke's 514 MW combined cycle New Smyrna Beach plant
still is on the drawing board, as are a couple simple cycle peaking
plants, which run around 640 MW each. "Once the gates are open it
will be interesting to see how many more plants are proposed," said