The Florida Supreme Court dealt a serious blow to thedevelopment of merchant power in the state and proposed new gassupply lines in a 6-1 decision issued last Thursday, reversing thestate Public Service Commission’s authorization for Duke Energy’sconstruction of a $160 million, 514 MW power plant at New SmyrnaBeach. (See NGI, Aug. 24, 1998)

The court found that applicable state laws were “not intended toauthorize the determination of need for a proposed power plantoutput that is not fully committed to use by Florida customers whopurchase electrical power at retail rates.” The PSC exceeded itsauthority, the court said, in granting a determination of needbased on only 30 MW of the plant’s total output dedicated toin-state use through the New Smyrna Beach municipal utility.

The court ruling effectively blocks a string of about 25merchant power facilities being planned by a number of companies,including Dynegy, Panda International, Reliant Energy and CalpineCorp., and brings into question the scheduling and viability of twonew gas pipeline projects.

“This decision vindicates our belief that state law nevercontemplated the construction of power plants whose output was notcommitted to meet the needs of the State of Florida,” said PaulEvanson, president of Florida Power & Light, which challengedthe PSC ruling before the court.

Joseph H. Richardson, president of Florida Power, which alsoopposed the Duke plant in court, said, “Florida Power is notopposed to merchant plants or to competition in the powergeneration market as long as these kinds of policy-making decisionsare considered in a comprehensive study of all the issues. Anythingother than this approach is piecemeal and potentially detrimentalto Florida’s electric customers.”

Duke spokesman Bryant Kinney said the company would have tostudy the ruling and its options. “We’re surprised anddisappointed. We were planning to build in Florida to serveFlorida.”

Steve Crain, a vice president for Panda International, whichannounced plans last month for two 1,000 MW power plants in Florida(See NGI, March 13), said the decision “represents a step back notonly for Florida as a state but for every resident’s future abilityto benefit from lower electric rates.”

“At the same time we …hope that Senate Bill 2020 will moveforward toward a meaningful evaluation of Florida’s electricindustry. We also commend Gov. Jeb Bush’s promise to act, even ifthe legislature doesn’t,” Crain said. Crain’s reference was to apower study bill, which was voted out of a state senate committeeearlier this week after a vigorous battle defeated an amendmentthat would have slowed development of merchant power. The governorhas expressed an interest in setting up his own study billcommission to make recommendations to the legislature in 2001.

The amendment would have required merchant plants to comply withthe same rules as Florida’s regulated utilities, includingdedicating power to Florida residents first and showing the needfor the plant by having 10-year contracts for the bulk of thepower. The amendment was submitted by state Sen. Buddy Dyer,D-Orlando, and then withdrawn after a heated committee debate. Eventhough the study bill was voted out of committee, observers gave itlittle chance of passing the legislature this year. It now appearsthe governor will take the initiative toward developing legislationfor next year.

The outside generators have been defending their proposals witha government study that shows the need for between 8,000 and 10,000MW of new power capacity in the state in the next 10 years. AnFP&L spokesman said, however, that the study was taken directlyfrom reports to the PSC by the state’s IOUs on their own generationbuilding plans. The report listed “every plant addition theutilities are planning to meet power needs.”

The IOUs believe merchant power operators should be required tocontract their power to regulated utilities, which are dedicated toserving Florida residents first and which must return any profitsthey make selling excess power into the wholesale market toratepayers.

A spokesman for the PSC said the commission currently isstudying measures that would provide incentives by allowingregulated utilities to retain some of the profits gained by sellinginto the wholesale market. Part of the Commission’s rationale forapproving the Duke plant was the fact that electric power pricesfor Florida residents generally average a few cents a kilowatt-hourmore than prices paid in surrounding states.

Meanwhile, the Federal Energy Regulatory Commission is set toconsider preliminary determinations for two proposed natural gaspipelines to fuel the growing generation load at its open meetingthis week. Buccaneer Pipeline and Gulfstream Pipeline are eachproposing about 700 miles of underwater lines from Mobile, AL tothe west coast of Florida and between 100 and 300 miles of pipe inthe Sunshine state to deliver the gas. Buccaneer is equally-ownedby Duke Energy and Williams. (See NGI, Feb. 14) There is somequestion as to the future of Coastal Corp.’s Gulfstream, since thatcompany is in the process of being taken over by El Paso Energy,which has an interest in Florida Gas Transmission (FGT), currentlythe only pipeline into the state, which has its own expansionplans.

The court decision strikes at the heart of the Buccaneer projectwhich has as a main underpinning a committed load of about 250MMcf/d from Duke Energy North America, the company’s wholesalepower generation development business unit. Delay of the Duke plantalready has cut into FGT’s expansion plans. Duke had signed on forspace in FGT’s Phase IV expansion due for deliveries in May, 2001,but dropped back earlier this year to its Phase V capacity additiondue in 2002. (See NGI, Feb. 28)

While some landowners are opposing the merchant power plants, atleast one group of residents apparently favors the projects.Friends of the Manatees, a group supporting Florida’s underwaterelephants that live in spring-fed lakes in the northwestern part ofthe peninsula, are in favor of construction of a nearby plantbecause the manatees will appreciate the warm water emanating fromthe plant.

Ellen Beswick

©Copyright 2000 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.