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Florida Ratepayers to Fund FPL's Natural Gas Exploration

Florida's largest utility has been given blanket approval to invest ratepayer funds into U.S. natural gas exploration and development to secure new energy supplies.

Florida Power & Light Co. (FPL) last year won approval by state regulators for one Oklahoma gas drilling venture (see Daily GPIDec. 19, 2014June 25, 2014). The Public Service Commission (PSC) gave its OK on Thursday for FPL to invest in other natural gas exploration without case-by-case approval to determine if spending is prudent for ratepayers. The investment program is to be reviewed in five years to determine if it is working well for ratepayers.

The five-member PSC voted unanimously for the investment plan, overriding a staff recommendation to reject it. Staff also recommended against allowing the utility blanket approval on projects because of the size of investments.

The approval allows the utility to charge its customers over a 30-year period. Gas exploration spending by FPL is capped at $500 million a year, versus FPL's request for $750 million and the PSC staff's view that only $250 million a year be allowed. PSC staff indicated  that would be "appropriate to have more experience with this form of investment."

Any exploration projects would require a readily available "transportation path" to carry gas into Florida, according to the commission. Those states that would qualify as sites for exploration today are Texas, Louisiana, Oklahoma, Arkansas, Mississippi, Alabama, West Virginia, Ohio and Pennsylvania.

Commissioner Julie Brown said FPL's plan may provide some rate protection. Developing gas reserves is the type of innovative program "worthy of our consideration," she said, and with a specific time period, commissioners would be able to determine whether customers are benefiting.

Florida uses natural gas for about 65% of its energy needs. The Juno, FL-based utility indicated last year it purchases up to 2 Bcf/d for its power plants at market prices.

The commission's approval is a win for customers, said company spokesman Mark Bubriski. "The U.S. natural gas market is growing," and FPL's potential gas exploration partners may have been "unwilling to wait through a lengthy regulatory process before moving forward." With the commission's blessing, the utility now may "seek out potential future projects to benefit our customers."

Initiatives such as developing gas reserves are "instrumental in helping us reduce customer rates, maintain reliability and provide clean energy for our customers...Since 2001, our investments in natural gas energy have saved customers more than $7.5 billion in fuel costs. Today, our typical customer bill is about 30% lower than the national average while our system is among the cleanest in the U.S."

FPL's only joint venture to date is with PetroQuest Energy in Oklahoma's Woodford Shale. The gas from that exploration project is expected to generate at its peak 2.7% of FPL's total fuel use. FPL did not disclose if it has additional partners lined up.

Not everyone is on board with the approval. The Florida Industrial Power Users Group had wanted each FPL exploration project to be reviewed individually. "This puts nearly half of Florida's businesses and residents, who are FPL's customers, in the risky natural gas business in places like Texas and Oklahoma," said Jon Moyle, the group's attorney.

Florida's Office of Public Counsel, which represents consumers in utility cases, has challenged the PetroQuest venture (see Daily GPIDec. 3, 2014). The appeal is before the Florida Supreme Court.

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