State: Bush, commission seek ways to avoid power struggle

The question Thursday was whether the state should let out-of-state companies build power plants as a way to guarantee juice keeps flowing in future years.

On one side was Gov. Jeb Bush, who said the state must take action or face California-style consequences.

"There are no new plants of any substance being built," Bush told the editorial board of the St. Petersburg Times. "We're going to have brownouts and blackouts in eight years the way it goes now, and yet we kind of wait for a crisis to respond."

A plan to open the state's wholesale power market to competition was presented Thursday in Tallahassee to a study commission that Bush created last year.

But several members of the Florida Energy 2020 Study Commission disagreed with the governor who appointed them. They argued that the state doesn't have an energy crisis like the one in California that is interrupting electrical supplies, saddling ratepayers with huge bills and threatening utilities with bankruptcy.

And they warned that deregulating wholesale power sales in Florida as California did could backfire.

"I am concerned that rates are going to go up as a result of us doing deregulation," said Sandra Mortham, a former state legislator and secretary of state from Largo. "I guess I don't see the dilemma we're trying to solve."

But chairman Walter Revell warned of the consequences of inaction.

Competition may bring the risk of higher electricity costs, he said. But avoiding competition won't guarantee that costs won't rise for other reasons, such as a lack of adequate supply, said Revell, a former state transportation secretary.

"At some point we need to agree that we Floridians are at risk. . . . We're at risk on all of that, whether we make no changes or go into an open market tomorrow," he said.

Out-of-state companies that build so-called merchant plants have clamored to get into Florida, which will need more power plants over the next decade to meet soaring demand.

In 1999, the Florida Public Service Commission approved a proposal by Duke Energy Corp. to construct a 514-megawatt plant in New Smyrna Beach.

But the state's three biggest utilities, including St. Petersburg-based Florida Power, appealed the decision. The Florida Supreme Court overturned the PSC last year, ruling that state law permits only utilities serving Florida retail customers to build plants in the state.

Then Bush appointed the commission last July to come up with a comprehensive energy strategy.

The panel has until Dec.1 to make recommendations to Bush and the Legislature on a range of issues -- including whether to let customers choose among competing companies to deliver power to their homes, how much energy the state needs and how to protect the environment and consumers.

Revell urged the commission to focus on wholesale deregulation first in an effort to present legislators with a proposal for their session starting in March. Staff members came up with a plan that would let out-of-state companies build plants to sell power to Florida utilities.

The state's established utilities could transfer their own plants to affiliates. They could buy power from the affiliates under contracts approved by the PSC over a six-year transition period while the out-of-state companies build their plants.

California deregulated its wholesale market in 1996 with hopes that competition would bring down prices and benefit consumers.

But erratic weather and tight supplies forced up prices starting last summer. Utilities in San Diego and Northern California are threatening bankruptcy, saying they are losing billions of dollars under state restrictions on what they can charge customers.

Revell said California's real problem is that environmental and other regulations have prevented construction of a major new plant for 10 years.

Florida won't repeat the same mistakes because the commission is asking questions now that California never properly answered, he said.

"California in the last five years has done almost everything wrong, starting with, in effect, no new supply (of electricity)," Revell said. "If you screw up on supply, you are totally behind the eight ball."

But another commission member, John J. Anderson of the AARP, said out-of-state power companies want entry to Florida to make money, not to lower consumers' bills.

"This is a business," Anderson said. "There is no free lunch here."

Sen. Tom Lee, R-Brandon, was a strong supporter of wholesale deregulation in the last legislative session. But he said the plan presented Thursday was maddeningly complicated, and he couldn't figure out what consumers might end up paying for power.

"That's the $64,000 question -- does this have a reasonable expectation of benefiting the consumer when matched up against the potential risks?" he asked. "And I am nowhere close to being there as far as an answer. In fact every day that goes by, I've got more questions."

Revell said he wants the panel to vote at its next meeting on Jan. 31 whether to issue a report to Bush. Bush told the Associated Press on Thursday he will wait to see what the panel comes up with.

"It's hard to tell this year if there's going to be action on this or not," the governor said.

- Information from Times wires was used in this report.

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Lucy Morgan

From the Times state desk