The Florida Public Service Commission (PSC) on Friday strongly encouraged investor-owned electric utilities and generators to hash out their differences over possible changes to the state’s generation bid rules and reach a compromise that would be presented to the PSC for further consideration in early September. If such a compromise is not reached, the PSC is expected to move forward with suggestions from PSC staff to begin a formal rulemaking process on changes to the bid rules.

The state’s current approach to bidding on new generation has generators up in arms. Power sellers that have set up shop in the state believe that those rules give Florida’s utilities too much say in deciding their power supply options.

The Florida Partnership on Affordable Competitive Energy (PACE), which represents generators and wholesale power marketers, is spearheading efforts to get the PSC to overhaul the bid rules. PACE is proposing reforms in Florida that would require utilities to seek pre-approval of their request for proposals (RFPs) and have all participants in the RFP process to submit binding bids at the same time. In addition, PACE wants an impartial evaluation of the bids by an independent evaluator.

On Friday, the PSC convened a workshop to determine whether it wants to take the issue of changing the bid rules to a formal rulemaking procedure. The end result of the workshop was the PSC’s directing parties involved in the bid rule proceeding to reach a compromise between now and a PSC meeting on Sept. 3. Along with generators and the state’s utilities, consumer groups are also expected to participate in the talks.

“I can’t sit here today and imagine that it’s going to be very easy,” PACE spokesperson Martha Harbin told Power Market Today in reference to the expected talks over the bid rules. “At the end of the day, we may end up in a formal rulemaking proceeding.”

From her point of view, a key point of contention is likely to emerge over the issue of utilities submitting their own binding bids “because that is essential to the IPPs [independent power producers], that the IOUs [investor-owned utilities] need to put a firm price on the table and have to live with that price and the IOUs don’t want to do that.”

Generators interested in building power plants in the Sunshine state complain that the bid rules, as currently configured, allow utilities to write RFPs, judge the bids, weigh them against an estimated cost of construction and award a contract. In addition, IPPs chafe at their having to submit binding price quotes, placing the risk on the company and its shareholders, while utilities only have to provide an estimated cost, which they can then “true up” at a rate-setting hearing held after the plant is built.

Harbin said that at this point, the worst case scenario would be for the PSC to consider and pass a stipulation proposed by Florida’s utilities late Thursday. The stipulation poses a threat to the generators in that if the PSC approved it, the docket in the bid rule proceeding would be closed and the IPPs would bear the burden of having to try and get the docket reopened.

But PACE doesn’t appear to think that’s a likely scenario at this point in time. “The only way they would do that is if we totally didn’t operate in good faith,” Harbin said. “I think as long as we put some good faith stuff on the table and really try to work, that the Commission is going to respect that,” she added.

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