Florida merchant power dances one step forward, two steps back

W. Christopher Browder and Kelly Brewton Plante, Gray Harris & Robinson, P.A.

The City of New Smyrna Beach and Duke Energy New Smyrna Beach Power Co. (the Duke Team”) made great strides on the road to merchant power with the Florida Public Service Commission (FPSC), only to have them snatched away by the Florida Supreme Court. The Duke Team filed a joint application for determination of need for a proposed 514 MWcombined cycle power plant to be built and operated in New Smyrna Beach-a critical step in the process of siting a power plant facility under Florida’s Power Plant Siting Act.

The contention made by opponents of the application claimed that since the Duke Power entity was not regulated as a utility by the FPSC, it was not an “electric utility” within the meaning of the Siting Act and was therefore an improper applicant. It was also argued that no proper showing of need could be established.

FPSC granted the need certification to the Duke Team and determined that need was demonstrated in spite of the fact that only 30 MW of the plant’s capacity was committed to the City of New Smyrna.

The victory was to be short-lived. The investor owned utilities within the state reacted immediately with an appeal to the Florida Supreme Court.

The Florida Supreme Court determined that the FPSC’s need determination was invalid because the FPSC exceeded its authority in granting the certification of need to a party which is not a proper applicant within the meaning of the Siting Act. The Court went on to say that the legislative history of the Siting Act “was not intended to authorize the determination of need for a proposed power plant output that is not fully committed to use by Florida customers who purchase electrical power at retail rates.” The Court held that granting the certification of need to the Duke Team exceeded the FPSC’s statutory authority and was, therefore, invalid.

Two disturbing (and no doubt unintended) issues arise as a result of the Florida Supreme Court’s holding. First, the narrow interpretation of a proper applicant could create questions as to the ability of organizations such as the Florida Municipal Power Agency (FMPA) to participate in the need applications for new generation projects in which they invest on behalf of their retail members. (FMPA is a joint action agency, which pools power resources to supply some or all of the electric capacity and energy needs of its member utilities-which, in turn, serve retail load.)

Second, the Court’s reasoning that the entire capacity of a proposed power plant must be subscribed in order to demonstrate the prerequisite need is problematic. It implies that no need certification may be considered by the FPSC and granted unless the entire capacity of the proposed generating facility is subscribed by Florida retail users. (It is a common practice for utilities to ask for and receive need certification to build generation capacity based on projected need.)

Earlier this year, Senator Tom Lee (R-Brandon) and Representative Tom Feeney (R-Oviedo) proposed legislation which called for a study of Florida’s current policies and regulations on (among other things) power plant siting and whether changes are needed. The legislation stalled and ultimately did not pass in part because Senator Buddy Dyer (D-Orlando) proposed a limiting amendment to the bill.

Recognizing the need for a comprehensive statewide energy plan, Governor Jeb Bush issued an Executive Order, which creates an Energy 2020 Study Commission consisting of 17 members-including two members appointed by the Senate and two members appointed by the House of Representatives-which builds on and implements a study commission very similar to that which was proposed by Sen. Lee and Rep. Feeney.

The first meeting is scheduled for September 2000. A report with recommendations on statewide energy policies and regulations is due to the Legislature and the Governor by December 1, 2001.

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