Houston-based Florida Gas Transmission’s request for higher profits substantiates FPL’s proposal to build new, competing pipeline
JUNO BEACH, Fla. – A new request from Florida Gas Transmission – the Texas-based company opposing Florida Power & Light Company’s new pipeline proposal – to raise one of its two main natural gas transportation rates by more than 50 percent underscores the need for increased competition to keep costs lower for consumers, FPL said today.
For months, FGT has attempted to block Florida Public Service Commission (PSC) approval of FPL’s proposed Florida EnergySecure Line. On Sept. 30, FGT filed a motion to terminate the PSC’s proceedings and move the case to a different venue. Then on Oct. 1, in a separate proceeding with the Federal Energy Regulatory Commission (FERC), FGT petitioned for an increase of more than 50 percent on one of its two main transportation rates to acquire an unusually high profit level – directly contradicting pivotal positions the Texas company has taken throughout FPL’s EnergySecure Line hearing.
“FGT’s filing with FERC has confirmed what FPL has said all along: the Florida EnergySecure Line is the most cost-effective and reliable method of increasing both competition in the market and overall supply of clean natural gas for the benefit of customers,” said Sam Forrest, FPL vice president of Energy Marketing and Trading. “The Florida EnergySecure Line will diversify the source of natural gas production beyond the Gulf of Mexico and enhance the reliability of the electric system that serves half the population of Florida while customers will see no impact on their bills for five years and a positive impact over the lifetime of the project.”
FGT’s rate increase request highlights the following contradictions:
1. FGT justifies its request for a sharp increase as an investment in new infrastructure as necessary to serve new customers in Florida, asserting that Florida’s population growth rate will be more than double the national average. This is in stark contrast to the pessimistic view of Florida population growth that FGT presented to the PSC in FPL’s EnergySecure Line hearing.
2. Another of FGT’s asserted rationales for its rate increase is the large projected investment in both existing and new infrastructure. FGT’s asserted need to invest in existing infrastructure markedly differs from FGT’s assertions before the PSC that FPL should expect declining FGT rates due to the cumulative effects of depreciation.
3. FGT claims that FPL’s proposal would cost customers more, despite volumes of data that prove that the EnergySecure Line would actually reduce costs over time. Yet FGT’s sudden increase is proof positive that Floridians need more gas transportation competition to keep prices lower, fulfilling almost overnight the predictions by FPL’s witnesses that FGT’s plan would actually increase FPL’s dependence upon the two major existing pipelines serving Florida, FGT’s being one of them. Increased dependence would make FPL and its electric customers even more vulnerable to rate increases for gas transportation, due to the very limited competition for that service.
FGT’s rate case filing reflects an increase of more than 50 percent in the cost of service for one of its two main firm transportation service rates, but essentially no increase to the cost of service for the other main firm transportation rate. The rate being increased is the rate that applies to approximately 40 percent of FPL’s currently contracted gas transportation capacity needed to serve existing generation. The increase is projected to cost FPL customers an additional $26 million per year for gas transportation.
Additionally, at the same time that FPL customers would be burdened by this rate increase, FGT expects to earn a return on equity (ROE) under its rate proposal in excess of 13.8 percent. This is more than 130 basis points above FPL’s requested ROE in the electric base rate case pending before the PSC. At FGT’s proposed capital structure of 60.74 percent equity and 39.26 percent debt, FGT is requesting an overall return of 11.58 percent, 373 basis points above the overall rate of return FPL requested in its base rate proceeding before the PSC. The high returns that FGT seeks to earn on the gas transportation services it provides to FPL and other customers underscores the need for additional competition.
“Clearly, FGT’s approach – arguing for a sharp increase in the cost of service for a rate that it is entitled to increase, while proposing no increase in the cost of service for a rate it cannot increase – evidences the need for additional competition in gas transportation that the Florida EnergySecure Line would provide,” Forrest said.
The Florida EnergySecure Line will benefit FPL's customers in several ways. First, it will provide a vital increase in the supply of clean natural gas to meet the needs of FPL's modernized Next Generation Clean Energy Centers at Cape Canaveral and Riviera Beach. Second, the project will also diversify the source of natural gas production beyond offshore Gulf of Mexico sources to additional onshore sources. This will benefit customers by broadening access to additional competitive markets for the supply of natural gas while helping to offset the risk of disruption to natural gas production in the Gulf of Mexico from hurricanes and tropical storms, as well as protecting access to the supply of natural gas and the electric generation it supports in the event any of these routes are disrupted. With FPL's Florida EnergySecure Line, customers will see no bill impact for five years and a positive impact to bills over the lifetime of the project.
Florida Power & Light Company
Florida Power & Light Company (FPL) is the largest electric utility in Florida and one of the largest rate-regulated utilities in the United States. FPL serves 4.5 million customer accounts in Florida and is a leading employer in the state with nearly 11,000 employees. The company consistently outperforms national averages for service reliability while customer bills are well below the national average. A clean energy leader, FPL has one of the lowest emissions profiles and the No. 1 energy efficiency program among utilities nationwide. FPL is a subsidiary of Juno Beach, Fla.-based FPL Group, Inc. (NYSE: FPL). For more information, visit www.FPL.com.