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Editorial: No clapping for PSC deal on natural gas hedging

 
Published June 10, 2016

Florida Public Service Commissioner Art Graham said last week he "applauded" the electric utilities for agreeing to modestly reduce hedging their purchases of natural gas. That reflects exactly what is wrong with utility regulation in this state. As utilities cost electric customers hundreds of millions with bad bets on natural gas prices, the regulators are congratulating them for voluntarily cutting back rather than taking decisive action on behalf of ratepayers.

Apparently, ratepayers should be grateful that the PSC approved the utilities' offer to reduce their hedging by 25 percent. The practice has only cost consumers more than $6 billion over 13 years, and they only stand to lose another $560 million this year. No need to move quickly here and put a stop to this financial foolishness as suggested by the Office of Public Counsel, which represents consumers before the commission.

Florida Power & Light, Duke Energy, TECO Energy and the rest will just be 75 percent as irresponsible playing this poker game with ratepayers' money as they have been. The PSC even joined the utilities in continuing to defend hedging as a responsible way to avoid big price swings. Never mind that it has been an unmitigated disaster for ratepayers for more than a decade.

Hedging involves agreeing to buy natural gas in the future for a price set now to guard against spikes in costs, and the PSC has allowed utilities to do it since 2002. But it has backfired, and natural gas prices have plummeted with the widespread use of fracking. FPL and Duke now rely on natural gas for roughly 70 percent of their fuel as polluting coal-fired plants are phased out, and some energy experts expect natural gas prices to be more stable in the future. It makes common sense to abandon a failed policy in the face of a changing economy, yet the utilities and the PSC refuse.

But this is what we have come to expect in Tallahassee, where the utilities invest heavily in state lawmakers and in governors who appoint PSC members. Just last month, it took the Florida Supreme Court to rule that the PSC exceeded its authority when it allowed FPL to invest in fracking and put the financial risk on the backs of its customers instead of its shareholders. Justice Ricky Polston, one of the court's most conservative justices, wrote it is outside the PSC's discretion to permit such a deal and would require the Legislature to change state law.

For the moment, electric customers have to take what they can get. They can only hope a 25 percent reduction in natural gas hedging so graciously agreed to by the utilities will be the start of something better. But ultimately it is going to take an overhaul of utility regulation in this state to restore some balance between the utilities making the political contributions and the customers paying the bills.

Until then, hold the applause.