State regulators gave their OK Thursday for Florida Power & Light Co. to enter into long-term natural gas contracts for gas that will be transported through a proposed $3.5 billion, 591-mile pipeline.
The Public Service Commission's unanimous vote also approved FPL's request to charge customers for the fuel and transportation costs through the fuel charges on their bills beginning in 2017.
Florida Public Counsel J.R. Kelly said the approval means that FPL customers could pay as much as $15 billion for gas transportation costs alone over the 25 to 40 years after the pipeline goes into service. The commission's vote amounted to a pre-approval of future costs, he said.
"The transportation costs are now fixed. The commission cannot go back and review that," Kelly said.
Customers will pay for the transportation of the gas and for the gas itself.
The pipeline slated to be completed in 2017 will begin in Alabama, and travel through four counties there, eight Georgia counties and 13 Florida counties. It will end at FPL's Martin County plant near Indiantown.
The pipeline's northern 465 miles is a joint venture of Houston-based Spectra Energy subsidiary Sabal Trail Transmission and a newly formed subsidiary of FPL's parent company, NextEra Energy Inc., called U.S. Southeastern Gas Infrastructure LLC. The southern 126 miles, known as Florida Southeast Connection, is a subsidiary of NextEra.
Commissioner Eduardo Balbis said the pipeline will help mitigate supply interruptions and price fluctuations. It's also a plus that the cost is $450 million below that of other options. The project is projected to create more than 6,600 jobs.
Jeff Householder, president of Florida Public Utilities Co. said the pipeline will bring additional supplies into Florida, including on-shore gas from shale. He expects his company will build lateral lines from it.
The new pipeline will join the state's two existing pipelines. Florida Gas Transmission Co.'s pipeline has a capacity of 3,100 million cubic feet per day, and Gulfstream Natural Gas System LLC's pipeline has a capacity of 1,300 million cubic feet per day.
FPL has signed agreements with the two entities that will own the new pipeline for an initial 400 million cubic feet per day beginning in 2017 with an option for an additional 200 in 2020 and later.
The project differs from a pipeline proposal state regulators rejected in 2009 when FPL sought to build itself what was called the 280-mile Florida EnergySecure Line.
FPL came back to the commission with a pipeline proposal that positions it as the largest customer of the pipeline, but not the developer. While the 2009 proposal
called for a $1.6 billion pipeline with the costs going into customer's base rates, Thursday's approval means that customers will be paying only for what FPL uses to run its power plants.
"Before, customers would have been paying for that pipeline before they got any use out of it, then would have been overpaying for it. This time they will only be paying for what they use when they use it," said Floyd Self, a Tallahassee lawyer whose practice includes natural gas and electric companies.
The proposed pipeline must be approved by the Federal Energy Regulatory Commission and a number of other federal and state agencies.
It would give the state 25 percent more natural gas capacity.