TALLAHASSEE – Florida Power and Light (FPL) knew it was taking a risk when becoming the first public utility to invest in gas production. Now, it's been dealt a major setback that means, at least in Florida, it'll be the last.
"Unless the law changes, it appears that it’s not viable in Florida," Theodore Kruy, a professor at the University of Florida Warrington College of Business' Public Utility Research Center, told the Florida Record. "The court’s decision was pretty clear, I think."
In May, the Florida Supreme Court issued a 6-1 ruling that said the state's Public Service Commission (PSC) overstepped its bounds in authorizing FPL, the state's largest utility, to invest in gas production by using ratepayer money. The PSC approved FPL's plan to invest $191 million in a joint venture with PetroQuest Energy for gas drilling in Oklahoma's Woodford Shale region. Last June, regulators approved allowing the two companies to boost their investment to $500 million, which they said would lock in lower gas prices and thus keep rates stable. However, FPL lost about $6 million on the investment of their ratepayers funds last year, and has lowered their projections on long-term benefits by over $50 million.
Kury points out that the court was not really ruling on the investment idea itself, as good or bad an idea as it may have been.
"I don’t think the court really expressed an opinion that there was a problem in allowing it," he said. "It just wasn’t the PSC’s job to allow it."
Despite the court only ruling on the authority of the PSC, the move was still widely seen as a bad idea, leading FPL to defend itself. The company has said that it always looks for chances to keep its customers' bills low, and claimed its typical customer bill is still the lowest in Florida. It also defended the Woodford decision, claiming it will still keep costs low over the long term. FPL did not, however, comment on whether it plans to ask the Florida legislature to officially make this type of investment legal.
Kury, however, does not foresee any other utilities going the same direction, at least not until the law behind these sorts of projects is firmed up.
"In the near term, I think all utilities are going to be buying their gas in the physical and financial markets," he said. "In the long term, this might be an issue that we see the legislature address. The court clearly felt that the responsibility lies with them."
The next step in this case, however, is determining how to undo the PSC's decision in terms of the money ratepayers lost. This is very likely to involve some sort of refund on the bills of FPL's customers.