In a win for Florida Power & Light customers, the Florida Supreme Court today reversed a Florida Public Service Commission decision allowing FPL to charge ratepayers for an oil and gas exploration and drilling venture in Oklahoma.
The court found the 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. The court said in its decision that the PSC considered the recovery of costs of the hydraulic fracking venture through fuel charges paid by FPL customers to be a long-term physical hedge.
“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,” the court wrote in its 20-page decision.
In an email, FPL spokeswoman Sarah Gatewood said the utility was “disappointed by the Court’s decision.” Gatewood said the Woodford project would “provide reliable electricity at low and stable prices by investing directly at the source to provide rate stability and reduce risk for our customers.”
In December 2014, the PSC approved FPL’s request to collect the cost of its $191 million venture with PetroQuest in Oklahoma’s Woodford Shale region from its 4.8 million customer accounts through fuel charges on their bills.
Then, in June 2015, the PSC gave FPL the go-ahead to invest as much as $500 million a year in natural gas drilling operations — effectively making the utility and its customers partners in what can be a risky business. FPL uses natural gas to provide 72 percent of the fuel to run its power plants.
Three PSC orders on the issue were appealed by the Office of Public Counsel, the Florida Retail Federation, and the Florida Industrial Power Users Group.
“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,” said Jon Moyle, a Tallahassee attorney who represents FIPUG.
The court also said that statutes allow utilities to charge customers only for costs arising from the “generation, transmission or distribution” of electricity, and the Woodford project falls outside of the purview of an electric utility.
Whether advance cost recovery of speculative capital investments in gas exploration by an electric utility is in the public interest is a policy determination that must be made by the Legislature, the court said.