The Florida Public Service Commission (PSC) last week initiated a rulemaking procedure aimed at reforming the state’s bid rule for new generation projects. The rule has come under fire from power suppliers who view the current bidding process as heavily stacked in favor of investor-owned utilities (IOUs).

Generators are upset with a series of recent requests for proposals (RFP) issued by utilities for new generation in Florida that have resulted in those same utilities picking self-build options over power projects proposed by outside energy suppliers.

The Florida Partnership on Affordable Competitive Energy (PACE), which represents generators and wholesale power marketers, earlier this year proposed reforms that would require utilities to seek pre-approval of their RFPs and have all participants in the RFP process submit binding bids at the same time. In addition, PACE has pushed for an impartial evaluation of the bids by an independent evaluator.

The PSC in July convened a workshop to decide whether to take the issue of changing the state’s bid rule to a formal rulemaking procedure. At the end of that meeting, the PSC directed parties involved in the bid rule proceeding to reach a compromise prior to a PSC meeting scheduled for Sept. 3. The PSC said that unless a compromise was reached by that date, it would consider staff recommendations for changes to the bid rule through a formal rulemaking process.

Representatives of PACE and the state’s utilities met over the summer in an effort to iron out their differences on the bid rule process, but were unable to reach a compromise.

The PSC on Monday voted in favor of opening a rulemaking on reformation of the current bid rule for new generation after several hours of debate among PSC Commissioners over what should be included in the proposed rule. At the same time, the PSC set the matter for hearing.

At the end of the meeting, PSC Chairman Lila Jaber addressed IOU and generator representatives on where the process goes from here. “We have established a hearing date. We’ve tried our best to put a rule out there that people can clearly get the direction from the Commission with [what], in our humble opinion, the rule should do and what it shouldn’t do,” Jaber said.

“I would ask that all of you take a look at the rule,” she added. “Give yourselves distance. Recognize what we did not include in the rule. Recognize what we said that the rule does and what we think the rule does not do and continue the dialogue,” Jaber said. “Ever the optimist, I’m not sure this is going to get to the hearing stage. I hope that this actually facilitates more discussion.”

Prior to the PSC’s move, Commissioner Michael Palecki did a nice job of crystallizing his concerns over the current bidding process for new generation in Florida.

“I am concerned that the process is falling apart,” he said during Monday’s hearing. “I am aware of at least five bidders from the past who’ve decided to move out of the state of Florida, who’ve decided no longer to participate in this process because they believe that an independent power producer does not have a chance to win a bid.”

Palecki went on to say that possible changes to the current bid rule does not involve competition. “This issue is about ratepayers and what is the most cost effective alternative and I think the process as it exists is driving the players away from the state of Florida and we no longer have that healthy situation we’ve had where…we have a lot of players coming in with a lot of creative ideas and the utilities are forced to beat the best deal.”

The PSC took the action after rejecting a proposal by IOUs designed to break the deadlock between the utilities and independent power producers have found themselves in over how best to overhaul the controversial bid rule for new power projects.

The proposed stipulation would have adopted a set of business practices, in addition to the requirements of the existing bid rule, in exchange for closing the case’s docket. The stipulation would have included a listing of the evaluation criteria to be used by an IOU in considering proposals, including a proviso that potential bidders retain creativity and discretion to respond to the RFP in ways not envisioned by the IOU.

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