Florida eyes deregulated wholesale energy market |
|
The commission unanimously recommended the Legislature take the following steps:
Permit out-of-state, independent power companies to build "merchant plants" in Florida that would generate electricity to be sold on the open market.
After a phase-in period, require in-state utilities to sell off their existing power plants or transfer them to subsidiaries that could compete with merchants in selling electricity to investor-owned and public utilities.
Freeze retail rates for three years, although increases in fuel costs and power purchases from other generators would be passed along to consumers.
The three-part proposal addresses only the wholesale electricity market, the power that is generated and sold to utilities, and not the retail energy market, the power purchased by residents and businesses. However, the commission is expected to deliver recommendations for the 2002 legislative session regarding retail deregulation, commonly called "customer choice." In a deregulated retail market, consumers can choose among companies competing to provide energy to their homes and businesses.
As in other states where some form of restructuring is underway or being weighed, Florida lawmakers and electric industry officials hope to avoid the types of problems plaguing California, which opened its electricity market to competition in 1996. A plan intended to reduce electric rates instead has tripled some California consumers' bills, while the state's wholesale power costs have increased tenfold.
Businesses, homes, factories, farms and streets have been darkened by rolling blackouts, when utilities intermittently cut service to selected areas, giving consumers ten to15 minutes advance notice by radio or TV, because of dips in power supplies. The blackouts and skyrocketing energy costs hinder manufacturing, agriculture and other industries, weakening the state's $1.3 trillion economy.
If Florida's decision-makers learn from the mistakes of their California counterparts, Florida's electric consumers won't have to endure similar problems. First, California's plan ordered investor-owned utilities to sell off their power plants and buy energy wholesale, but capped the rates they could charge consumers when energy prices rose, partly due to the soaring cost of natural gas.
The state also prevented the utilities from entering long-term wholesale purchasing agreements, forcing them to buy on the more expensive spot market. Consequently, the state's two largest utilities, Southern California Edison and Pacific Gas and Electric Company, are on the verge of bankruptcy, $12.7 million in debt and unable to pay their suppliers.
Furthermore, California's stringent environmental laws have created a shortage of generation. No new power plants have been completed in the past decade, and some aging facilities have been taken out of operation for repairs and service. Also contributing to tight energy supplies has been a shortage of rain and snow to supply water for hydroelectric power generation.
California's three electric distribution cooperatives opted not to participate in deregulation - a choice Florida's co-ops also might have. Regardless, West Florida Electric Cooperative's consumers aren't likely to face inadequate power supplies because its power supplier, Alabama Electric Cooperative, is taking steps to ensure sufficient generation for years to come. With a current generation capacity of 1,171 megawatts, AEC is constructing a 500 MW combined cycle plant expected to go into service in December this year, and plans to install a similar plant in 2004 or 2005 to meet growing demand. Additionally, long-term, all-requirements contracts stipulate that AEC must sell its power only to its 21 member systems, including WFEC.
Because WFEC's power supplier is in Alabama, the Co-op's board and personnel follow electric industry-related issues there, as well as Florida. So far, our northern neighbors have made no move toward deregulation. After conducting hearings on the matter in April 2002, Alabama's Public Service Commission concluded that restructuring the state's electric utility interest would not serve the public's best interest at this time.