Morris Plains, NJ, April 12, 2002 — Florida is an electricity crisis waiting to happen, a new study warns.
In a study recently released, William P. Kucewicz, editor of GeoInvestor.com, points to a number of danger signs in the Florida’s electric power infrastructure.
“Florida is one of the fastest growing states in the nation in terms of population. Its climate, moreover, makes residents heavily dependent on electricity, especially to run air conditioners. Florida also has difficulty in importing electricity from neighboring states because of severe transmission constraints and its peninsular geography. Yet Florida is the only state in the nation that prohibits construction of merchant power plants to sell power on the wholesale market,” Kucewicz says. “This wholesale market has lowered costs and shifted the risk of new power plant construction from ratepayers to the stockholders of the companies that build them.”
The study supports, in general, the conclusions of the Energy 2020 Study Commission appointed by Governor Jeb Bush, which also recommended that Florida transition to a competitive wholesale power market.
Kucewicz criticizes the Florida Public Service Commission’s “bid rule,” which makes Florida utilities both “the contestant and the judge” in the competition to build new power plants. No Florida investor-owned utility has accepted an outside bid since 1994, when the current bid rule was enacted.
“The result: few new plants have been built since the early 1990s. The danger is that a utility will skew the process to favor its own proposal over competing bids to supply power, perhaps at lower cost. This problem is at the heart of a dispute between Florida Power & Light Co. (FPL) and Reliant Energy Power Generation, Inc. that’s now before the Florida Public Service Commission,” he says.
Prohibited from erecting merchant plants, independent power producers (IPPs) are availing themselves of an exception in Florida’s Power Plant Siting Act to construct small gas-fired “peaking” units. Peaking plants are designed to run only a few hours a day, when electric demand is highest. They are inefficient and expensive to operate. Over-reliance on peaking plants and under-investment in regular electric generating plants is reminiscent of what happened in California, which had to rely heavily on high-cost peaking plants during its recent electricity shortage.
“Given the Sunshine State’s population growth and rising electricity demand, its power supply, transmission lines and regulatory environment are inadequate to prevent a future power shortage, including blackouts,” concludes Kucewicz.
“Independent power producers should be provided with a level playing field on which to compete against the self-build proposals of Florida utilities. Only in that way can Florida’s electricity customers be guaranteed that they’re paying for the lowest cost energy available on the market – and not subsidizing the bottom lines of the state’s investor-owned utilities. Otherwise, the risks and costs of utility self-build power projects will fall on Florida ratepayers instead of electric company shareholders.”
Kucewicz, a former Wall Street Journal Editorial Board member and Dow Jones correspondent, has written extensively on energy issues for more than 20 years. He founded the global investment Web site GeoInvestor.com in 1999. The report is available at http://www.geoinvestor.com/ .