Customers will save tens of millions of dollars. Wait — they will lose money. No, wait — they will save something (at least in the long run). That's the dizzying report from Florida Power & Light, which less than a year into a 50-year project has ping-ponged back and forth about the savings it projects from a speculative investment in natural gas. These early results reinforce that the Florida Public Service Commission never should have given permission to the utility to invest in fracking and put the financial risk on the backs of its customers instead of its shareholders.
The PSC in December voted to allow FP&L to invest $191 million in a fracking project in southeastern Oklahoma. The process involves injecting liquid at high pressure to free up gas deposits deep underground. But a report last week by the Tampa Bay Times' William R. Levesque exposes how far the state's largest utility missed the mark in an inflated and arrogant campaign to win approval for the speculative venture.
As Levesque reports, FP&L told state regulators last year the most likely scenario showed the project would net $107 million in customer savings. The company belittled critics, telling regulators that opponents had based their claims on "flawed assumptions, contradictions and even invented facts." Now the shoe's on the other foot, as FP&L reports in a new filing that the first savings have vanished and that the company forecasts a nearly $6 million loss in 2015. The new estimate for savings during the 50-year project has been cut by more than half, to $49 million. "It's still $50 million," a company spokeswoman said. "We still project significant savings over the life of the project."
The huge discrepancy between what FP&L projected and what its customers may ultimately see is an indictment of the approval process and a belated warning for regulators. Though the PSC, in approving the deal, cited a more conservative savings estimate in line with the latest $50 million figure, the swing in projections over a matter of mere months calls the industry's credibility into question at the very time the PSC has given the green light to more speculative investments.
The Office of Public Counsel, which represents consumers in cases before the PSC, said it fears the first-year loss estimates may prove that the long-term savings never will materialize. And while FP&L said the project is meant to diversify the company's energy mix and act as a hedge against higher prices on the market, it's unclear how a venture that would provide no more than 3 percent of the company's gas supply amounts to a meaningful investment strategy. The public counsel also is challenging whether the practice of electric utilities hedging their bet on future fuel prices should continue, noting that hedging losses have totalled more than $6 billion since 2002.
The fracking folly is another example of the industry-friendly PSC allowing the utilities to load financial risks on their customers and away from their shareholders. And it reinforces that the commission listens more to the electric monopolies than consumers when developing the state's long-range energy policy. No wonder Floridians think the deck is stacked — and no wonder the utilities continue to peddle promises that (not surprisingly) don't materialize.