FPL gets approval to charge customers for fracking investment

Customers will be on the hook for natural gas drilling projects in Oklahoma, PSC says.
Published December 18 2014
Updated December 19 2014

State regulators approved a proposal Thursday to allow Florida Power & Light, the state's largest utility, to charge its customers for investment in natural gas production, an idea Duke Energy is reviewing.

FPL won approval for natural gas drilling projects in southeastern Oklahoma with the ability to recover its investment under the fuel portion of its customers' bills.

FPL proposes to invest $191 million in the PetroQuest Energy Inc. joint venture. The utility projects net savings for customers of about $52 million.

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.

In a hearing before the state Public Service Commission this month, FPL stated that the natural gas production investment is expected to secure the fuel at a stable cost to customers for as long as the wells produce gas, typically about 30 or more years.

Mark Bubriski, an FPL spokesman, said the company is focusing on sites that already are producing natural gas.

"This is not just exploration," Bubriski said. "It's actual production. This investment won't increase fracking or the use of natural gas."

Duke Energy said it was watching the FPL case because fracking investment is one of the proposals the utility is studying to bring stability to volatile natural gas prices. Though Duke has not made any final decisions about exploring fracking, the company said there could be significant benefits to ratepayers.

"It would lock in gas supplies in the long term at the wellhead," Jennifer Zajac, a Duke spokeswoman, told the Tampa Bay Times earlier this month. "If we did that, it would reduce the fuel (price) volatility with gas. Customers do like us to reduce fuel costs. We would have to get a solid return."

Critics of the strategy called it "socialism" for taking customer money for business ventures that the utilities should pay for with shareholder money.

FPL's investment in fracking comes as New York state moved this week to ban fracking over health concerns. New York's health commissioner said scientific data remains insufficient to determine if fracking is safe. 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.

Florida utilities stand to make significant financial gains with the fracking strategy. Florida utilities currently do not profit from the cost of fuel used to run their power plants. The utilities bill customers for their fuel costs as a pass-through charge.

But the fracking deal would allow the utilities to earn profits on the fuel that powers their plants, along with revenue from the construction of the facilities and the electricity they generate. FPL's proposal would be the first effort by the state's utilities to charge customers for fracking exploration.

Bubriski said the deal is also a benefit to ratepayers because they already pay for profit for fuel producers and middlemen in the process.

To the critics, FPL and other utilities that pursue fracking investment should not involve customers. "This is plain and simple national socialism in Florida," said Mark Cooper, a senior fellow for economic analysis at Vermont Law School. "They have no risk. Why should ratepayers bear that risk?"

Times/Herald staff writer Mary Ellen Klas contributed to this report. Contact Ivan Penn at ipenn@tampabay.com or (727) 892-2332. Follow @Consumers_Edge.

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