Thursday, September 20, 2018
Business

Q&A: Florida utility watchdog J.R. Kelly talks shop and his one beef with solar

Florida Public Counsel James Ray "J.R." Kelly is the irritating itch that the state's investor-owned utilities can't seem to satisfactorily scratch. In his watchdog role at the chief of the Office of Public Counsel, Kelly's agency represents consumer interests before the Florida Public Service Commission. With critics of the PSC continually arguing its commissioners give utilities nearly anything they want, it is often Kelly's roll to help stop the steamroller.

His office was the primary catalyst in slowing, and perhaps ending the utility practice of hedging the price of natural gas, a policy that led to more than $6 billion in customer losses since 2002. Kelly's office also fought a $1.3 billion rate hike by the state's largest utility, Florida Power & Light, an increase later scaled back to $811 million.

Kelly, 59, talked to Tampa Bay Times about his job, his continuing battles with utilities and his one pet peeve about solar energy. Here are excerpts:

In the age of Donald Trump, do you worry that the public and lawmakers may start to lose sight of the critical role an office such as yours plays in protecting consumer interests?

Well, it wouldn't be true to say I sit up and worry about it at night. There's always a little bit of concern. But I think when we have the opportunity to sit with the Legislature members and tell them what we bring to the table, I think they do see the value in our office. And I think the utilities, by and large, even thought we're adversarial with them and we fight them tooth and nail on certain issues, I think that they would tell you we serve a very important purpose of making the rate-making mechanism better. Would they not like to have our office challenging them on certain issues? Absolutely. They would rather muzzle us and not have us here. But overall, I think, if you ask the utilities, they say we bring a lot of value in making the rate-making mechanism work better.

In hedging, a utility buys an amount of fuel at a fixed price at a future date. If market prices climb above the hedged price, the utilities and their customers save money. If prices fall, as they have done with natural gas in recent years, consumers lose big. Florida's got a moratorium on new hedging so the issue can be studied. What does the future hold for hedging in Florida?

Well, the utilities have so far, most of them, have argued to retain hedging. Duke Energy has been the least resistant to terminating hedging. I don't know, I haven't seen anything that leaves me to believe the utilities are going to change their posture.

What's in it for the utilities, who argue hedging prevents volatility in customer bills?

I'm not 100 percent sure. However, under the old hedging rules, if the utility is ordered to hedge say a certain percentage of their natural gas purchases, that takes a lot of the risk out of their making imprudent purchases. They can go in and enter into a hedging contract for a certain percentage of their sales and they don't necessarily have to prove up that it was a prudent hedge or not because they will argue they were simply following their hedging plan, which was approved by the commission.

Has the state become too reliant on natural gas for electricity generation?

Absolutely. That's always a concern. A perfect world would be where you'd have a balanced generation mix of natural gas, coal, maybe some nuclear. And when I say coal, I mean reduced-emission coal, whether it'd be a plant that reduces the emissions or it's a less emission type coal. My greatest hope is that there would be a technological breakthrough for coal that would allow it to come back into the mix so that we therefore wouldn't be so reliant on natural gas.

Utilities have all gotten into the solar farm business, building large arrays of solar panels over acres of land. Is this all public relations? What do you think that is about?

The utilities are in business to make money. So if they can build solar that would deter or prevent a consumer from buying solar on their house, then obviously they would be incentivized to build big solar farms. Solar is something that we've got to do more in Florida. But I do have a concern. I'm a native Floridian and I grew up with green Florida. We've got grass. We've got farmlands. And we've got trees. And it takes a tremendous amount of space to build a solar farm for what is relatively a few megawatts of energy.

I'm a big proponent of rooftop solar, whether it be commercial rooftop or residential rooftop. I'm glad to see prices coming down and a lot of consumers that were not able in past are now able to invest and put it on homes and businesses. While solar farms are a reality, being a native Floridians, it bothers me that you're going to go cut down 300 acres of trees and build 300 acres of solar panels where you can't have any grass growing, you can't have any vegetation, you can't have any trees because that is not the native Florida that I grew up in.

FPL sought a big rate hike last year. Now Gulf Power is doing the same, even amid cheap natural gas prices. Are utilities getting more aggressive in seeking rate increases?

I see no change. They've always been aggressive. Yes, sir. Yes they have.

Contact William R. Levesque at [email protected] Follow @Times_Levesque.

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