Florida

Regulators allow FPL to invest in natural gas fracking

A Florida Power & Light truck.
A Florida Power & Light truck. MIAMI HERALD FILE

The Public Service Commission gave the green light Thursday to Florida Power & Light’s plan to go into the controversial fracking business in Oklahoma and bill its customers for the risky investment.

The PSC gave approval to a request by the state’s largest utility, allowing FPL to invest $191 million in a joint venture with PetroQuest Energy, Inc. FPL says the investment would help stabilize volatile future energy costs. Savings for FPL customers are expected to be small — about $100 million over 30 years or two cents a month for the average 1,000-kilowatt-hour bill.

The measure was opposed by the lawyers who represent the public in utility rate cases, as well as the state’s largest industrial energy users, the Florida Retail Federation and several environmental groups. The PSC postponed a decision until March on the question of whether FPL will be allowed to charge customers up to $750 million a year in similar projects without PSC approval.

The opponents argued that there was no guarantee that the risk of shouldering the costs of oil and gas drilling in an uncertain regulatory environment would produce benefits for ratepayers, and such a move could backfire in higher costs. They also argued that the decision to allow the company to use customer dollars for speculation was something that should be left to the Legislature.

“FPL will shift all risks of investing in gas reserves to the customers in exchange for promises of potential customer fuel savings and guaranteed trued-up profits (or returns) for shareholders,’’ the public counsel said in its brief. It noted that it is not opposed to guaranteeing fuel savings to customers. However, “FPL simply cannot guarantee those savings to customers over the next 50 years.”

The ruling could be the beginning of a trend as Duke Energy, the largest utility in the Tampa Bay market, said it is also considering asking for permission to charge its customers for fracking exploration.

Currently, utility companies are allowed to pass along all of their fuel costs to customers but are obligated to try to hedge the impact of fluctuating prices. FPL argued that because it purchases more natural gas than any utility in the nation, it had an economic interest in finding ways to reduce the impact of the volatile natural gas costs.

Commissioner Eduardo Balbis, who led the debate to endorse the proposal, called it “an effective form of hedging in that it reduces volatility.’’

He said that because of federal regulations which are reducing the use of coal-burning power plants, most of the company's fuel comes from natural gas and 70 percent of that comes from fracked wells.

Hydraulic fracking is a technology that involves injecting large volumes of water, sand and chemicals at high pressures to release oil and natural gas from rock caverns deep underground. On Wednesday, New York became the second state to ban hydraulic fracturing because of concerns over health risks, including water contamination and air pollution.

“If customers are going to pay for gas that comes from unconventional sources, they will get it cheaper,’’ this way, Balbis said.

Commissioner Julie I. Brown said she supported the proposal for similar reasons.

“Let’s face the reality here,’’ she said. “We are becoming more and more dependent on natural gas and we will only continue to become more natural gas dependent.”

Commissioner Lisa Edgar defended the proposal and said it had been misunderstood by many in the public. “It’s not about fracking in Florida,’’ she said. “Fracking in Florida will be a policy decision by the Legislature.”

The proposal was also not about drilling in the Everglades, decreasing conservation or renewable energy, and “it’s not about drilling exploration in a greenfield site,” she said. “Most of the natural gas used to provide to Florida businesses is currently coming from fracking areas across the country.’’

Commissioner Ronald A. Brisé said that he opposed the idea, but voted for it anyway to follow the majority.

“The question really boils down to a policy hurdle: Do we want utilities to get into the production business. What risks and challenges are associated with that?’’ he asked. “Do we as a commission have the tools to look at that and ensure that our customers would be getting the best deal all of the time?”

The panel modified FPL’s request by suggesting that the company be required to hire an independent auditor to monitor the books of PetroQuest, because the PSC will not be allowed to see how much ratepayers are being charged for the exploration process.

The PSC decision was unusual in that it was made without the aid of a formal recommendation from the PSC’s staff. PSC Chairman Art Graham concluded that FPL needed the decision soon, although there was nothing in the record that indicated the need for urgency. A staff recommendation, however, might have included elements that were not suitable to FPL, forcing the regulators to contradict their staff.

Regulators will address the broader policy question — about whether to expand this proposal to include agreements with other companies without having to get PSC approval — in March. That ruling will include a staff recommendation, which will be released in February.

A proposal to ban fracking in Florida, similar to New York’s, has been filed in the Legislature.

Mary Ellen Klas can be reached at meklas@MiamiHerald.com and @MaryEllenKlas

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