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Thursday, Apr 25, 2019
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Fracking: Florida utilities want you to pay

The drilling process known as fracking holds promise in helping the United States achieve energy independence, but it has also drawn concern for its potential to cause widespread pollution of underground water supplies.

Now, two of Florida's top utility companies — Duke Energy and Florida Power & Light — are adding fuel to the fires of debate over fracking with proposals to shift the high cost of exploration from their stockholders to their customers.

Tampa Electric Co. says it hasn't decided yet whether it will want to sock its customers with these costs — or whether it even wants to get involved with fracking.

The term is short for hydraulic fracturing, and it's a way to extract natural gas — the fuel that runs the turbines that produce electricity in most of Florida's power plants.

The financing scheme, to charge utility customers the cost of risky exploration whether it pays off or not, may be the first proposal of its kind in the country.

“I have never heard of anything like this,” said Sharon Wilson, a gas and oil expert with Earthworks, a nonprofit energy-development watchdog. “But I guess nothing should surprise me anymore.”

Earlier this year, budget proposals before the North Carolina legislature would have spent taxpayer money on advertising the state as a site for fracking — a jobs and economic development measure — and used public dollars to pay for exploratory wells. The proposals did not pass.

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America's Natural Gas Alliance, which represents gas exploration and production companies, declined to comment specifically on the FPL plan.

“We are encouraged by proposals that enable long-term procurement of fuel supplies for customers,” alliance spokesman Dan Whitten said in an email. “As producers, we are confident that our nation has an abundant and reliable supply of natural gas that is available for decades to come.”

He added that in any kind of business arrangement, including joint ventures, “the costs of exploration and development are included in the price of gas.”

“And all of these options allow for a portfolio of transactions and long-term tools that help to manage risk.”

FPL is first in line before the state Public Service Commission, which held a Dec. 1 hearing on the request. The utility wants permission to charge customers up to $750 million a year for exploratory fracking in Oklahoma, according to Commissioner Julie Brown's prehearing order. The deal would be a joint venture with PetroQuest Energy, headquartered in Louisiana.

The filing did not break down how the cost would be spread among FPL's various residential, commercial and industrial ratepayers.

Fracking involves drilling deep underground and shooting fluid at high pressures to break up shale rock, causing a sort of miniature earthquake and releasing the gas trapped inside.

The technique has raised concerns partly because the fluid contains chemicals that can pollute underground water supplies, creating a potential health hazard.

What kind of chemicals and how much are used are questions usually treated as trade secrets so the mixtures are unknown.

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FPL contends that striking a sure supply of gas will establish “a predictable, reliable and low-cost fuel supply … for FPL and its customers,” according to PSC records.

That will “ensure more stable prices for the gas FPL burns in its power plants.”

The utility wants to shift costs and risk to customers by using the state's “fuel clause” — a regulation enacted in 1980 that allows power companies to pass along the expense of fuel to run power plants.

More than shifting costs, however, FPL's proposal also would allow the utility to potentially make a profit on any gas it discovers and extracts.

Susan Glickman, Florida director of the nonprofit Southern Alliance for Clean Energy, compared the FPL plan to another cost-shifting tactic: a 2006 law that lets utilities charge hundreds of millions of dollars for nuclear-power plants that may never be built.

Now, two Tampa Bay lawmakers are backing a bipartisan measure that would repeal that law.

Duke Energy, which serves thousands of customers in the Tampa Bay area, took in money through the law to construct two nuclear reactors in Levy County. It has since killed that project — but kept the money.

The bill from Rep. Chris Latvala, a Clearwater Republican, and Rep. Amanda Murphy, a New Port Richey Democrat, would also refund all unspent funds to utility customers by July.

The Legislature convenes for its annual 60-day session on March 3.

“Utilities are always looking to add to their rate base, because they're going to get a guaranteed return, like a waiter at a country club gets a guaranteed tip,” Glickman said. “They want you to spend more money.”

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The Office of Public Counsel, the state's utility watchdog, opposes the FPL plan. It says the proposal will simply allow stockholders to benefit without having to shoulder any risk.

Moreover, FPL “cannot guarantee savings to customers over the next 40-50 years,” the office said in a filing. “FPL should not be permitted to spend customers' money on the faint promises of speculative savings.”

Richard Heinberg, an environmental activist who is critical of fracking's economic benefits, agrees that savings are only likely over the short term, meaning five to 10 years.

“Claims made about shale gas tend to be overhyped,” said Heinberg, author of “Snake Oil,” about what he calls fracking's “false promise of plenty.”

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In fact, production per well tends to drop precipitously after the first year, by as much as 70 percent, his research shows.

“There's a quick boom and bust cycle in the shale gas industry,” Heinberg said.

To keep up overall production, “you would have to drill, at a ferocious rate, tens of thousands of new wells, and ultimately maybe hundreds of thousands,” he said.

At the same time, “there are only so many sweet spots” in which to drill, Heinberg said.

The Florida Industrial Power Users Group also is fighting FPL's proposal, saying that “ironically, FPL has avoided this very same risk for years, as fuel costs are passed through annually” to customers.

“FPL's ratepayers do not want to accept this natural gas fuel cost risk, and it should not be forced upon them,” the group told regulators.

The Public Service Commission will discuss the proposal and is expected to make a decision at its Thursday meeting.

 

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