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Electric Restructuring: Before, During and After

Fortnightly Magazine - November 15 1999

in 10 years?

First, we are not in the process of restructuring our electric utilities in Florida. Clearly that is the purview and the policy issue that is to be handled by the legislature of our state.

What we have done in Florida is that we recently approved Duke Power to enter Florida's competitive wholesale market. It is the first time that a merchant, in essence, is allowed to come into Florida with a contract of only 30 megawatts to sell to the city, New Smyrna Beach, and then can sell the additional 470-plus MW into Florida's already competitive wholesale market.

That, of course, has drawn the ire of the investor-owned utilities, who have sued me at the state Supreme Court. Florida Power & Light, Florida Power Corp. and Tampa Electric Co. have sued. All three have filed against the project.

What does that project do?

That project, to a large extent, was very favorable because it is the first project that we ever had an environmental group in favor of. Second, it reduces the cost to the people of New Smyrna. Energy costs alone are some $3.1 million on a yearly basis. ¼ On top of that, Florida gets an additional 500 MW-plus being generated in our state, plus it gets a $160 million generation station in our state.

Is this a sign of things to come?

Florida is an attractive market for generators and clearly the wholesale market is where the biggest advantages are presented in terms of cost savings. ¼

I think if you are a generator and you are looking 10 years out, you are saying, where do I want to be. You can never catch the future if you are behind it. Clearly the future is going to be in Florida because Florida is going to continue to grow. That is why there are about seven or eight different companies that are looking for sites in Florida. PG&E filed [in September] for a 500-MW-plus generation station, which is also a merchant plant. We also have Louisville Gas & Electric which is looking, Constellation Power, which has a 950-MW combustion turbine peaking unit that it is building, Reliant just bought a 619-MW station from the city of Orlando.

Why hasn't Florida restructured?

We don't have the pressures that California or the Northeast has. Clearly we don't have those pressures because our pressures are not that far out of whack. ¼ We are low industrial and we have a lot of commercial clients. Those people are uniting on this issue.

If you have a Kmart in Rhode Island, for example, that ¼ got a 5 percent decrease in its electric rate, well, to that Kmart maybe that represented, I am guessing here, a $20,000 reduction in its electric rates. ¼ When you turn around and you are a Kmart guy in Florida, being 50 times the size of Rhode Island, the number two cost in Florida, after labor, is electricity. You have to ask yourself, if I get a 5 percent reduction in Florida, that may be somewhere in