State Politics

Voter proposal would end electricity monopolies and create choice

Members of the Constitutional Revision Commission listened to residents during a town hall meeting with Floridians in Miami at Florida International University in Miami in April 2017.
Members of the Constitutional Revision Commission listened to residents during a town hall meeting with Floridians in Miami at Florida International University in Miami in April 2017. pportal@miamiherald.com

Members of the Constitution Revision Commission will vote Friday on whether to allow Floridians to vote on being able to choose their electricity provider, effectively dismantling the monopoly utilities who control electricity generation and transmission in the state.

Supporters say the change will significantly lower utility costs, super-charge renewable energy and electricity innovation, create thousands of jobs, attract new business to the state and pump more money into rural areas. Opponents, backed by the state’s powerful utility industry, warn that the change is too disruptive and will bring more problems than it solves by creating uneven service reliability and few cost savings.

The CRC is the 37-member board that has the power to put amendments directly before voters on the November 2018 ballot and Proposal 51 is among the most future-altering of the ideas before them.

It is modeled after the electricity deregulation in Texas under that state’s former governor, George W. Bush, which opened its electricity market to competition.

Under the plan, utility companies would continue to own electricity poles and wires but the power plants and the marketing would become competitive. Consumers would buy the electricity from a third-party supplier that puts it into a transmission line operated by the utility company. The utilities make money transmitting the electricity, but they must compete with others if they want to generate and sell electricity.

“Electricity choice lets us pick our own energy suppliers for the energy itself and competition leads to more rates and options,” said Rick Blaser, founder of Gainesville-based Infinite Energy, which sells natural gas in Florida and supplies electricity in Texas and three other states where competition is allowed.

He said people can lock in electricity rates like a fixed mortgage, shop based on price to get the best deal, and even choose renewable energy “for some or all of their usage. We can’t do any of that now.”

Blaser was the first to bring the idea to the CRC at a public hearing in Gainesville. The idea so intrigued CRC Commissioner Jacqui Thurlow-Lippisch that she invited Blaser to speak before her committee.

Rich Newsome, a Tampa lawyer appointed to the commission by House Speaker Richard Corcoran, studied the data and the experience in other states, spoke to current and former regulators in Texas, and decided to sponsor the proposal, setting its effective date at 2021.

“This is one of the few proposals that will affect everyone,” he told the General Provisions Committee in December. “This thing polls at 76 percent. This is something that Floridians want. They want choice.”

Proponents say that energy choice would lower prices. It would inspire innovation in electricity delivery, creating efficiencies and innovations. They also say that when customers can choose providers, companies are motivated to improve their customer service.

But Newsome realizes that if the CRC puts it on the ballot and voters approve it, it could break the grip of the monopoly utilities that profit off the control of electricity generation, transmission and retail sales in Florida and so he has already faced steep opposition.

“One of their lobbyists told me they spent $200,000 just to get ready for the committee meeting,” he said.

He urged his colleagues to be willing to challenge the energy industry’s sacred cow.

“We all know there are certain industries because of the dollars they give to campaigns and the dollars they spend on lobbyists — and the ability to throw $200,000 at one committee meeting — that certain things just can’t be touched,” he said. “We can touch it. This group has the opportunity because we’re not beholden.”

The Florida Chamber of Commerce and Associated Industries of Florida, which receive financial support from the utility companies, have come out in opposition to the measure.

“While Proposal 51 sounds like a simple concept, restructuring utility competition through a constitutional amendment will create significant implementation challenges and, based on other states’ experiences, will increase rates for electricity consumers,” the chamber said in a statement last month.

Front groups for the utility industry have cited concerns about deregulation in other states. PACE, which is funded by subsidiaries of the Southern Company that owns Gulf Power, made claims that competition will lead to less reliable electricity.

“The current system has served the Sunshine State well,” said Kevin Doyle, executive director for the Florida chapters of the Consumer Energy Alliance, an advocacy group funded by the fossil fuel industry which supports oil drilling off the coast.

“Electricity prices are lower in Florida than the national average and lower than our neighbors in Alabama and Georgia,” he told the CRC committee in December.

The proposal has the backing of Walmart.

Chris Hendrix, director of markets and compliance for Wal-Mart Stores, Inc., estimated that, based on the company’s’ experience in the 13 states where electricity pricing is competitive, Proposal 51 would save the retail giant about $15 million per year in Florida at its 385 stores in the state.

“From 2007 to 2016, our costs in competitive electricity markets decreased by about 7 percent on average,” he told the CRC committee last month “These savings would not only lower costs for stores but for consumers as well.”

The solar industry likes the proposal because it opens the door to companies and homeowners who invest in solar arrays to sell their generation to neighbors.

The groups have formed the Florida Energy Freedom coalition and hired the Perryman Group, an economics research firm based in Waco, Texas, to analyze the savings to Florida customers.

If Florida had a mature competitive electricity market in 2016, customers would have saved about $6 billion, said Ray Perryman, who conducted the study. “By 2030, we estimate a 25 percent reduction in rates and $7.5 billion in annual savings” and a gain of up to 100,000 permanent jobs.

“I know a lot of people say the benefits primarily go to people other than the residential users,” he said. “But that’s simply not the case. In fact, the majority of the savings goes to residential users, and it’s very popular among residential users.”

But Newsome said the most persuasive arguments came from the regulators in Texas, who didn’t have a stake in the game.

He said they told him, “in the 15 years since deregulation this has succeeded beyond our wildest dreams. Rates have gone down. We’re having to fight the hedge funds because there’s so many opportunities. Products that we’ve never seen before they’re offering retailers.”

Despite the warnings perpetuated by the opponents, Texas has had no brownouts or blackouts brought on by deregulation, said Pat Wood, former chairman of the Texas Public Utility Commission and former head of the Federal Energy Regulatory Commission in a conference call with reporters this week.

The few brownouts that have occurred were weather related. In California, which did have blackouts when it first implemented deregulation, they were the result of flawed deregulation, he said.

“Since 2010, Texas has saved about $5 billion every year,” because of deregulation, Wood said. “The state’s residential and commercial industrial rates and wholesale rates have fallen since the beginning of the market in 2002.

“My own rates, not adjusted for inflation dropped from 10.5 cents per kilowatt hour in Houston to 7.3 cents. My sister in Dallas, who uses less power, pays only 5.8 cents per kilowatt hour.”

By comparison, the U.S. Energy Information Administration data shows that the average electricity rate in Texas is 11.24 cents a kilowatt hour, compared to Florida’s average of 12.12 cents.

Florida is the only one of the nation’s seven most populous states that does not have price competition for its electricity market, according to the coalition.

But because the disruption to the state’s utility giants would be tantamount to what happened with telecom as the wireless industry supplanted land lines, Newsome is realistic.

“There’s a lot of impediments,” he said last month. “You can try to do it through the Legislature but, no disrespect, sacred cow. There’s a lot of dough out there.”

Read Proposal 51 here.

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