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Florida Regulators Deny FP&L's Intrastate Pipeline Proposal

October 12, 2009
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The Florida Public Service Commission (PSC) last Tuesday voted to deny a Florida Power & Light Co. (FP&L) proposal to construct a 300-mile intrastate pipeline to move natural gas north to Bradford County from Palm Beach County and ordered the project to be rebid.

By a 4-0 vote the PSC approved an alternative staff recommendation that FP&L had not demonstrated that the proposed $1.53 billion Florida EnergySecure Line was the most cost-effective and reliable source of natural gas supply, transport and delivery -- though commissioners agreed that there is a need for 400 MMcf/d for two FP&L plants the pipeline would serve.

"We understand the need for supply diversity and long-term natural gas reliability, but it must be accomplished in a cost-effective manner," said Chairman Matthew Carter.

FP&L filed its proposal for the Florida EnergySecure Line in April (see NGI, April 13). The 30-inch diameter pipeline's initial capacity would be 600 MMcf/d. About two-thirds of that capacity would be used by the FP&L Next Generation Clean Energy Centers at Cape Canaveral and Riviera Beach, where existing facilities are being retrofitted from fuel oil to natural gas to reduce emissions, the utility said. The remaining capacity would allow for a reserve margin to deliver fuel to FP&L or others in the state. The pipeline would "pull from onshore sources in areas like North Texas, Louisiana and Arkansas," an FP&L spokesman told NGI.

"We are very disappointed that despite a lengthy, comprehensive and transparent process, the commission effectively denied the clear need for this investment and required that the entire process start over in order to go forward," said FP&L CEO Armando Olivera. "FPL conducted an extensive evaluation of more than 60 proposals from seven different companies for both intrastate and interstate pipeline designs and found that the Florida EnergySecure Line as proposed would provide the lowest cost option for FPL customers...we now need to reevaluate the pipeline project based on the PSC's decision today."

FP&L had proposed recovering costs associated with the pipeline through its electric utility rate base and had said during hearings that it would not build the pipeline without rate based financing. The utility "didn't want to be in the natural gas transmission pipeline business," according to PSC staffer Martha Brown. "There would be administrative expenses to setting up a separate subsidiary and it's primary intention was to serve the needs of its power plants."

Last month a PSC staff report on FP&L's proposal included both a primary recommendation to approve the application and an alternative recommendation to deny it (see NGI, Sept. 28). Commission staff issued opposing recommendations on seven issues, including the question of whether the pipeline is needed to improve or maintain gas delivery reliability and integrity within the state. Florida Gas Transmission (FGT), which had filed to intervene in the case, has said existing pipelines in the state, almost all of them owned by FGT, provide sufficient capacity to meet projected demand for approximately eight to 10 years.

On the eve of the vote, FP&L said a recent FGT request for increased transportation rates proved that the state needs increased competition. In an Oct. 1 filing, the pipeline company asked the Federal Energy Regulatory Commission for approval of tariff changes, including increasing one of its two main gas transportation rates by more than 50%, FP&L said. That request for a large rate hike confirms that the competing FP&L pipeline is "the most cost-effective and reliable method of increasing both competition in the market and overall supply of clean natural gas for the benefit of customers," said Sam Forrest, FP&L vice president of energy marketing and trading. FGT said the utility's statements were "misleading" and issued "in a blatant effort to distract Florida customers and the [PSC] from both its proposed $1.3 billion annual rate increase and its proposal to construct an unnecessary $1.6 billion intrastate natural gas pipeline."

Prior to its decision on Tuesday, the PSC denied a petition from FGT to terminate the pipeline proposal. FGT, the state's largest natural gas transmission provider, had requested that the PSC dismiss the pipeline case "because of the appearance of impropriety and identified prejudice of some commission staff members." The PSC said it denied FGT's request because it was based on a recent inspector general's report that found no staff bias at the PSC.

Critics have said FP&L has too much influence over the PSC. Last month alleged ethics lapses forced the resignation of two PSC staffers and two others were placed on administrative leave. The Florida Department of Law Enforcement had been reviewing actions at the PSC after a commission lobbyist admitted that he attended a party at the home of an FP&L executive.

A fifth seat at the dais, usually occupied by commissioner Katrina McMurrian, was empty Tuesday. Gov. Charlie Crist had requested that the commission postpone votes on major cases, including the FP&L case, until after two newly appointed commissioners take office. Crist recently said he would not reappoint Carter or McMurrian, and named two new commissioners whose terms are set to begin Jan. 2. McMurrian submitted her resignation the day before the vote.

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