Senate advances bill to let FPL customers pay fracking costs

Florida Power & Light’s quest to have customers pay for natural gas fracking projects in other states overcame a key hurdle Tuesday as the Senate Rules Committee passed the controversial measure and overlooked opposition from residential and commercial customers.

The proposal, SB 1238 by Sen. Aaron Bean, R-Fernandina Beach, now goes to the Senate floor. A similar measure in the House, HB 1043, has made it through one of three committees in that chamber.

The goal of the legislation is to overturn a Florida Supreme Court ruling last year that found the Public Service Commission exceeded its authority when it gave FPL permission to charge customers up to $500 million for investing in an Oklahoma-based fracking company in 2015. Although the company predicted the project would save customers millions in fuel costs, it resulted in a loss of $5.6 million in the first year.

The Rules Committee adopted a series of amendments proposed by Sen. Jack Latvala, R-Clearwater, who opposes the measure, and approved the modified bill on a bipartisan vote of 7-3.

Latvala said the bill will “for the first time make the ratepayers pay for exploration” and “allow the utilities to charge a rate of return on that exploration cost.” He asked Bean if customers pay if the well produces a “dry hole — so all the risk is with the ratepayers and not with the company?”

Bean responded: “That is correct” and added that the projects won’t be exploratory because “it is highly likely that there is natural gas,” he said. Latvala countered: “That is still exploration.”

Consumer groups ranging from the state’s largest industrial users and the Florida Retail Federation to AARP opposed the measure, arguing the policy will cost FPL customers millions and lock the state’s largest utility into an increased reliance on fossil fuels for decades to come.

Sam Forrest, vice president of energy marketing and trading, said that “much of the natural gas that we use today, that Floridians use, is produced using technologies that rely on hydraulic fracturing — or fracking as it’s called.

“I understand some of the angst about it. We’re not talking about fracking in Florida,” he said. “But we are talking about furthering the technologies that are already being used today.”

He said the practice is akin to fuel hedging and compared it to homeowners insurance in which “You pay a premium. Your house doesn’t burn down at the end of the year, you don’t complain about the premium and you don’t ask for your money back. That’s what the opposition is doing here. They’re asking for their money back.”

But opponents countered that if the investment was so important for FPL, it should have shareholders finance the projects instead of customers.

“We believe, fundamentally and respectfully, that this bill is traveling under a false premise and that premise is we need hedging,” said Jon Moyle, lobbyist for the Florida Industrial Power Users Group. “We don’t need hedging.”

The Latvala amendments require FPL to invest only in known gas reserves, reducing the odds that consumers will be financing speculative drilling. Another amendment requires the companies FPL hires to do the drilling to show they are financially viable and another allows the drilling investment to take place only if there is a transportation pipeline already in place.

Latvala, who was engaged in budget negotiations for much of the day, withdrew an amendment that would have prevented the company from charging customers for natural gas projects that use fracking technologies.

Moyle said projections are that the price of natural gas is expected to remain flat, and he said that the history of natural gas hedging by the utilities, and under the PSC’s oversight, has cost customers more than $7 billion in additional fuel costs since 2002 — “$315 per person.”

“We view this as tantamount to a rate increase,” he said. “This is really about making money on gas.”

As an investor-owned utility, state law allows FPL to earn a guaranteed profit of at least 10 percent on its costs attributed to providing energy to customers, he said. If FPL were to spend $1 billion on natural gas drilling investments, it could earn $100 million a year, he said.

“I can understand why FPL is excited about this bill. The consumers are not excited.” 

Sen. Tom Lee, R-Thonotosassa, said he opposed the measure because customers would get hit twice: first paying for the cost of the fuel, and second paying for FPL’s profit on the investment — whether or not it produces fuel.

“What ends up happening potentially is the consumer, the rate base, ends up picking up the tab for natural gas that wasn’t there that was supposed to be,” he said. “I don’t see how we could represent this bill will help keep fuel bills low. I think it could well have the other effect.”

Latvala compared this to the nuclear cost recovery fee that allowed utilities to charge customers for nuclear power plants without guaranteeing that the projects will be built. “It has come back to bite us in the butt since then,” Latvala said. “I just want to make sure everybody understands that we’re breaking some ground here. Maybe it’s OK. FPL is a good corporate citizen.”

The Senate bill is a top priority for FPL, whose lobbyists’ close relationship with former Sen. Frank Artiles raised questions.

Since January, FPL has contributed at least $1.5 million to legislative political committees, including $5,000 to Latvala’s political committee, Florida Leadership Committee.