Group Recommends Pulling Plug On Structure Of Utilities
Written by Marilyn Bowden on March 22, 2001
By Marilyn Bowden
With blackouts and power shortages in deregulated California making headlines, the deregulation of Florida’s utilities could be addressed during the current state legislative session, according to industry watchers, although nothing is yet on the agenda.
Walter Revell, chairman of the Florida Energy 2020 study commission, said the 19-member body has recommended to Gov. Jeb Bush and Florida legislators a restructuring of the state’s wholesale market for energy.
Mr. Revell is president and CEO of Coral Gables-based HJ Ross Associates.
The study commission appointed by the governor last year is "charged with looking at the entire energy picture in the state of Florida," he said, "and coming up with a strategic plan for the next 20 years."
The commission’s final assessment is not due until Dec. 1, Mr. Revell said, but an interim report requested by the governor before this month’s opening of the Legislature recommended changes in state law to allow full competition in the wholesale energy market.
"The House is more interested than the Senate in the wholesale generation idea," he said. The commission looked first at deregulating the wholesale market," he said, "because of pressure from merchant plant people."
Mr. Revell said Florida is the only state that does not allow the operation of merchant plants — independent energy providers that sell on the open market.
The Florida Building Owners & Managers Association, or BOMA, which represents more than 800 businesses and is the state’s fourth-largest, tax-paying entity, is in favor of deregulation as a way to keep energy supplies up and costs down, said John K. Scott, president of the Greater Miami-Dade chapter.
Last week, he said, a delegation from the group met with senators and representatives to explain its position and ask to provide input in any energy bill that might come up for consideration.
"Deregulation is part of a healthy market," Mr. Scott said, "but we need to look carefully at how we obtain it to prevent problems like California is having."
In California, which deregulated in 1996, severe energy shortfalls have resulted in the need for rolling blackouts throughout the state.
"What California did is dumb, dumb, dumb," Mr. Revell said. "They deregulated backwards. They didn’t build any new power plants in 10 years, and they buy up to 28% of their energy out of state. We’re not doing anything like what they did there."
Mr. Scott said BOMA’s position is that deregulation, properly handled, can avert shortages and reduce costs.
He said power bills from Florida Power & Light for office buildings have risen 20% since the beginning of this year due to rate adjustments.
FPL spokesperson Bill Swank said rates for large commercial properties have gone up twice in 2001, 11.8% in January and 12.8% effective April 1.
Rate adjustments are the result of fuel-cost hikes. California’s 1996 deregulation law does not allow utilities to pass those costs on to consumers.
Mr. Swank said FP&L regards deregulation as a poor option for Florida’s future.
"Our position is that the current system is not broken here," he said. "Our rates are at or below the national average. Our reliability is well above the national average. By 2004 utilities in Florida will have a 20% reserve margin. So the specter of blackouts will not be what it is in California."
FPL is spending $1.3 billion during the next several years, he said, for an additional 2,500 megawatts of power.
"Utilities in Florida have made a commitment," he said, "and are obligated to meet consumers needs."
Mr. Swank said the Florida Energy 2020 proposal would mandate utility companies siphon off their power plants into separate affiliates that would also be considered merchant plants within six years.
"The fallacy is that merchant plants by name and purpose don’t have to enter into long-term contracts," Mr. Swank said, "but sell to the highest bidder.
"There is no guarantee that they will serve Florida. So we can’t plan to keep the load in Florida through them."
Since merchant plants also would be subject to higher fuel costs and would need to cover their investments, Mr. Swank said, "it’s na‹ve to think that simply because they are coming in to compete, prices will come down."
Mr. Revell said the state’s study commission is also looking into the development of Grid Florida — a statewide transmission network mandated by the Federal Energy Commission — and retail distribution and consumer issues such as availability, safety and reliability.