A special commission formed by Florida Gov. Jeb Bush isrecommending the state break up its monopoly utilities and pave theway for competition in the power generation market by doing awaywith certain laws and amending others.
The Florida Energy 2020 Study Commission approved a plan thatwould result in a “systematic transition to a competitive wholesalemarket, but [would be] designed to avoid the problems experiencedin California.” The plan, which is expected to be submitted to theFlorida legislature next month, recommends the removal of statutorybarriers to entry for merchant power plants and provides atransition to a “level playing field” for all generation assets.
Investor-owned utilities in the state would be required to spindown generation assets at book value to an affiliate. They alsowould be required to buy their power through a competitiveacquisition process, including bilateral agreements, RFPs,short-term spot purchases and a variety of other methods.
Commission members took great pains to point out the differencesbetween what they are proposing and California’s recipe for powerfailure. Unlike California’s utilities, Florida’s utilities willnot be forced to rely only on the spot market for their powerpurchases.
However, Florida does face a potential power shortage.Commission Chairman Walter Revell echoed the concerns of thestate’s governor that Florida faces a significant increase in powerdemand over the next decade or two and needs to remove barriers togeneration plant developers.
The latest estimates show that Florida will need 11,000 MW ofadditional power generation in the next eight or nine years to meetrapidly growing demand.
“There’s definitely a need to get generation on the ground thereand I think by opening up the wholesale market to the merchantfacilities that you can put Florida in the position to have enoughgeneration to meet [its] needs as [it moves] forward with totalderegulation,” said Duke Energy spokesman Rick Rhodes.
The Florida Supreme Court last year ruled against Duke Energy’sNew Smyrna Beach merchant generation project, a decision thateffectively stopped dozens of proposed merchant power projects intheir tracks.
Florida’s wholesale power market is basically closed tocompetitors because its power plant siting laws state thatwholesale generation plant developers cannot be “applicants”without a “determination of need,” which the state Supreme Courtinterpreted last April as meaning “fully committed” to servingretail customers in the state.
To remove the barriers to entry, the Florida Energy 2020 StudyCommission’s plan recommends changes to the “need determinationstatute” and the Power Plant Siting Act. Last May, Bush ordered theformation of the commission to determine the power needs of thestate over the next 20 years and to provide recommendations to thelegislature on how to serve those needs in the most efficient andreliable manner.
The commission’s plan also would involve changes to Chapter 366of the Florida statutes to allow the utilities to transfer existinggeneration assets out of their rate bases and to allow them to buypower as specified in the plan. Statutory changes also are neededto smooth the way for the formation of GridFlorida, the regionaltransmission organization that is being set up by the state’sutilities next year. The commission also recommends that ratepayersbe protected from any adverse impacts from restructuring by athree-year rate freeze.
“It’s a good first step,” said Duke’s Rhodes. “We were at thetable several times and were asked to provide input from adeveloper’s side. We’d like to commend Walter Revell and his staff.This is a good package. We feel pretty confident that therecommendations in the package are directionally correct and theinterests of the consumers are being well represented” so it shouldmove through the legislature. “The ball has been punted. I wouldthink it would be one of the first issues [the legislature]tackles,” he added. “It’s an issue that affects every consumer inFlorida.”
Rhodes said Duke’s 514 MW combined cycle New Smyrna Beach plantstill is on the drawing board, as are a couple simple cycle peakingplants, which run around 640 MW each. “Once the gates are open itwill be interesting to see how many more plants are proposed,” saidRhodes.
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