The Florida Supreme Court on Tuesday drilled into the state’s largest utility on whether it should be allowed to charge customers for a fracking deal that may or may not save them money on electricity.
The plan by Florida Power and Light to invest in a natural gas fracking project in Oklahoma was approved by the Public Service Commission last December. But consumer advocates say that approval wasn’t within the PSC’s authority.
FPL insists that the fracking deal will result in cheaper electricity for its customers in the long term — as much as $49.2 million in savings in the next 50 years. Yet, so far, the drilling project has cost more than it would have to buy natural gas at a market rate. This year, the project lost $5 million, and it is projected to lose even more money next year.
The justices’ questions Tuesday focused on two key points: whether FPL is allowed to charge its customers for a deal that may or may not result in savings, and whether the PSC was empowered to approve it.
FPL’s lawyer, Raoul Cantero, said it clearly is within its rights, just as it’s OK for the company to build power plants and buy natural gas. He compared the arrangement to a restaurant that decides to stop buying ingredients from a grocer and start buying directly from a farm to lower costs.
But that’s not a convincing argument to consumer advocates, who point out that FPL is not like most other businesses. It is a monopoly, and its customers don’t have other choices for who provides their electricity.
“My clients appreciate the electricity they receive,” said Jon Moyle, a lawyer representing a group of utility customers, “but they don’t want to take on the risk of buying natural gas developments in Oklahoma, Louisiana and Texas.”
The problem isn’t the investment itself but that any risk is on the backs of consumers, Moyle and the Florida Public Counsel, which represents utility ratepayers, told the court.
“FPL can go and invest its money in whatever,” said John Truitt, a lawyer with the Public Counsel.
Customers will fund the costs of the deal, regardless of whether the projected savings happen, opponents argued. By passing investment costs on to customers, they guarantee themselves a profit, even if the investment doesn’t pan out as expected.
“What we’re really dealing with is how far the Legislature intended the monopoly to go in the kind of investments that would be seen as prudent or not prudent,” Justice Barbara Pariente said.
But Cantero said that FPL could not have afforded to make the deal without funding from its customer base.
“There isn’t a way for [FPL] to do this deal absent the PSC approving it?” Pariente asked.
Cantero countered, “They don’t have $191 million.”
Not every justice was as skeptical of FPL as Pariente.
Justice Charles Canady seemed sympathetic to their argument, responding to the risk that Oklahoma fracking might not save money as anticipated by FPL by saying, “nothing in life is surefire.”
“This is about obtaining a necessary component of producing power, the fuel,” he said. “This is about obtaining that and being compensated for that in the rate-making process.”
As for the Public Counsel, Truitt says they’re just looking for clarity as to what kinds of investments are acceptable for public utilities. In the past, investments in mining have been struck down. And this is no different, he said.
While FPL awaits a ruling from the higher court, it is continuing to drill and charge customers.
Miami Herald Tallahassee Bureau staff writer Mary Ellen Klas contributed to this report.
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