Florida Supremes Bar Utility from Charging Customers for Natural Gas Production Venture

Published July 5, 2016

In a 6 to 1 decision, the Florida Supreme Court reversed a Florida Public Service Commission (PSC) decision allowing Florida Power & Light (FPL) to charge its ratepayers for an oil and gas exploration and drilling venture in Oklahoma. 

In its May 19 decision, the majority of the court ruled PSC exceeded its statutory authority when it approved recovery of FPL’s costs and investments in the Woodford Project in Oklahoma’s Woodford shale region. While the PSC considered the recovery of costs of the drilling venture through fuel charges paid by FPL customers to be a long-term physical hedge against rising fuel costs, Florida’s Supreme Court wrote, “Treating these activities as a hedge requires FPL’s end-user consumers to guarantee the capital investment and operations of a speculative oil and gas venture without the Florida Legislature’s Authority. Accordingly, we reverse.”

PSC Decision Reversed

The cased stemmed from a December 2014 decision by the PSC to grant FPL’s request to collect the cost of its $191 million gas drilling venture with PetroQuest in Oklahoma’s Woodford Shale region from its 4.8 million customers through fuel charges on their bills. Later, in June 2015 the PSC sanctioned FPL’s decision to invest up to $500 million a year in natural gas drilling operations, effectively making the utility’s customers partners in the highly speculative natural gas exploration and production business. Natural gas provides 72 percent of the fuel to run FPL’s electric power plants.

The PSC’s decisions were challenged by Florida’s Office of Public Counsel — established by the legislature to represent and defend the interests of Florida’s utility consumers before both federal and state regulatory bodies — the Florida Retail Federation, and the Florida Industrial Power Users Group (FIPUG).

The Palm Beach Post reports, Jon Moyle, a Tallahassee attorney who represents FIPUG said after the decision, “It is a good day for FIPUG members and other consumers. They will not be forced to pay for risky oil and natural gas ventures in Oklahoma and elsewhere.” 

In making its decision, the court noted statutes allow utilities to charge customers only for costs arising from the “generation, transmission or distribution” of electricity, with the Woodford natural gas exploration and production project falling outside of those limits. If the legislature wishes to allow FPL to recover the costs of speculative capital investments by the state’s utilities, it, not the PSC, must make that determination. 

H. Sterling Burnett, Ph.D. ([email protected]) is the managing editor of Environment & Climate News