Michael T. Burr, Editor
Strange as it sounds, Florida won’t allow most combined-cycle merchant power plants to be built in the state. At the same time, however, simple-cycle units and plants sponsored by Florida utilities will proceed unhindered.
This bizarre situation arises from an ongoing war between the state’s IOUs and would-be wholesale power merchants from outside Florida. A decision at the Florida Supreme Court in April reversed last year’s approval by the state Public Service Commission (PSC) of the New Smyrna Beach power plant, a 514 MW combined-cycle facility being developed by Duke Energy of Charlotte, N.C.
The court’s ruling was based on the 1997 Florida Electrical Power Plant Siting Act, which requires power projects to seek a “determination of need” from the PSC. The Siting Act authorizes the PSC to approve plants that will meet “a specified demonstrated need of Florida retail utilities for serving Florida power customers.”
In other words, proposed plants must first have a commitment from a retail utility to buy their power output-i.e., a power purchase agreement.
“The [Siting Act] was interpreted to read that to qualify for a site certification, you must be a retail-serving entity within the state. No merchant plant is such, and the ruling outlaws the whole category of power plants,” said Andy Bertron, an attorney with Huey, Guilday & Tucker who is representing Florida ALERT-the Alliance for Electricity Restructuring Today.
Strangely, the Siting Act appears to exempt merchant plants that do not generate more than 75 MW of steam-i.e., simple-cycle plants don’t need to jump through the PSC need-determination hoop. As a result, one option for companies planning combined-cycle plants is to go ahead with construction of simple-cycle phases, with later plans for adding heat-recovery equipment and steam turbines.
This is one alternative being considered by Panda Energy, a Dallas-based IPP that is trying to build two 1,000 MW, combined-cycle plants in Florida. Nevertheless, Steve Crain, Panda’s vice president of merchant plant development, sees the state court’s ruling as a major barrier to its ability to compete in the state.
“Right now there’s a three-year backlog for gas turbines. As soon as we stop our progress, the turbines we’ve ordered will be committed elsewhere,” Crain says. “FP&L recently announced that they have 66 turbines on order from GE. By the time the door opens for us to come in, they will have the market need filled.”
As a result, Panda and other companies are exploring legal remedies to the conflict-based on the state’s possible violation of interstate commerce laws or Federal Energy Regulatory Commission Order 888.
Unwelcome to Florida
“Florida is the last state to even look at restructuring,” Bertron said. “But the real question is not ‘why Florida?’, but ‘why are FP&L and Florida Power so adamantly opposed to IPPs?'”
Bertron asserted the utilities are fighting wholesale competition because they see it as a step toward retail competition in Florida. “By keeping out merchant plants, utilities are making the transition to retail competition much more difficult down the road,” he said. When full competition is introduced, potential competitors will face lower power demands and higher stranded-cost issues.
FP&L and Florida Power, on the other hand, insisted that they are in the best position to fill the state’s power demands, and that allowing merchant plants to spring up across the landscape without oversight threatens power grid reliability and the environment.
“Our position all along has been that Florida law clearly doesn’t allow for merchant plants,” said Joseph H. Richardson, Florida Power’s president and CEO. “Florida Power is not opposed to merchant plants or to competition in the power generation market as long as these kinds of policy-making decisions are considered in a comprehensive study of all the issues. Anything other than this approach is piecemeal and potentially detrimental to Florida’s electric customers.”
As if in response, Florida Governor Jeb Bush signed an executive order in May creating a commission to propose a new energy strategy for the state. The governor’s office and merchant power advocates hope the commission’s efforts will lead to electricity restructuring in Florida, …. finally.