A big win for FPL ratepayers

Thank goodness for some rational minds in Tallahassee, a place where special interests reign supreme – especially when the Public Service Commission sits in session. The Florida Supreme Court thrashed the so-called state utility regulators by voiding the commission’s unprecedented approval of a bid by Florida Power & Light to charge customers for a speculative investment in fracking.

Forget the broad public opposition to the objectionable practice of capturing natural gas and petroleum from rock layers deep in the earth by forcefully injecting water, sand and chemicals to break up the formations in order to release the trapped hydrocarbons. The PSC decision had put utility customers on the hook for some $750 million a year in a speculative fracking deal with an Oklahoma-based company. FPL signed an agreement with PetroQuest Energy for the exploration for natural gas using hydraulic fracking to extract the fuel.

Florida’s high court concluded the PSC lacked statutory authority to approve the risky venture – defining the commission decision as an “overreach.” This Editorial Board railed against putting the onus on ratepayers who had no say in the matter instead of putting the risk on shareholders. Indeed, the court ruled exactly that, stating the investment should be charged to FPL’s stockholders — who do have a voice in the company’s direction.

Last week’s strong 6-1 Supreme Court decision should put the PSC on notice that utility-friendly commissioners do indeed have legal boundaries. The ruling specifically stated FPL lacked any power from Florida’s Legislature to allow a hedge with consumers paying for a speculative oil and gas venture.

Time and time again, the Public Service Commission has rubber-stamped requests from the utility monopolies, including this one. Last year the commission spurned the recommendation from its own staff and unanimously approved the risky fracking project — also withholding oversight from state regulators over the next five years, another irresponsible action.

The Office of Public Counsel, the public’s representative on commission business, hailed the Supreme Court’s ruling as “a great victory for ratepayers (that) will prevent them from having to bear the cost of some very speculative risk.” The Florida Retail Association and Florida Industrial Power Users Group also objected to handing FPL a guaranteed new source of revenue.

Had the PSC’s decision stood on this precedent-setting deal, other utilities could be expected to line up for similar approvals to finance energy exploration and production out of the wallets of ratepayers.

FPL claimed the customer investment would provide a long-term hedge against unstable fuel costs, which state regulations allow utilities to recoup from ratepayers under a fuel-recovery clause. The high court rejected that argument, thus protecting Floridians from taking an improper risk.

A hedge allows a utility to purchase fuel in the future at a fixed price. If those costs rise beyond that agreed-upon price, the utility saves money. If not, the losses can be brutal. Power companies have engaged in hedging for years in order to reduce fuel cost swings. The Supreme Court’s decision focused on a narrower point, a ratepayer investment in speculative energy exploration.

From 2002 to 2015, Florida electric utility companies lost $6 billion on hedge bets — with $789 million coming last year alone. The biggest loser? Over that time span, FPL lost $4 billion. In December, the Public Service Commission once again turned deaf to consumer concerns and rejected calls to end this practice — a proven failure, yet commissioners defend it with their usual questionable judgment and docile capitulation to utilities.

Had the Florida Supreme Court not thwarted the latest utility gambit, additional billions could have been gambled away.

This story was originally published May 26, 2016 at 2:16 PM with the headline "A big win for FPL ratepayers."