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Energy deregulation efforts running out of time

State lawmakers say chances are fading fast for a decision on merchant power plants in the current session.

By STEVE HUETTEL and ALISA ULFERTS

© St. Petersburg Times, published April 6, 2001


TALLAHASSEE -- Prospects for passing a law this year to open Florida's wholesale electricity market to competition are dimming quickly.

Chairmen of the Senate and House committees overseeing electric utilities said Thursday that a study commission's blueprint for deregulation may be too flawed and the issues too complex for members to vote on a bill before the Legislature adjourns May 4.

Rolling blackouts in California, caused in part by that state's botched attempt at deregulation, are persuading legislators it might be better to hold off.

"Let's not take some moves we'll regret a year from now," said Sen. Walter "Skip" Campbell, D-Fort Lauderdale, chairman of the Regulated Industries Committee. "It's too complicated."

Campbell and his House counterpart, Utilities and Telecommunications chairman Rep. Jeff Miller, R-Milton, said in interviews Thursday they likely will direct staffers to research deregulation issues and perhaps draft legislation for the 2002 legislative session.

At a committee hearing Thursday, Campbell distributed outlines of his own proposals that differed substantially from the commission's plan.

He invited Florida utilities and out-of-state power companies to suggest a bill for the committee to consider but acknowledged it was getting late.

"I'm not sure we're going to have anyone come to the table and have a reasonable solution," Campbell said.

Out-of-state "merchant power" companies such as Duke Energy have pushed to build plants in Florida and sell electricity to utilities on the open market.

Big Florida utilities fought to keep them out and won a decision in their favor from the state Supreme Court last year.

To break the stalemate, Gov. Jeb Bush appointed a study commission to come up with a compromise plan for the Florida Legislature. The panel's package included allowing merchant plants into Florida.

Supporters such as panel chairman Walter Revell argued the plan would bring more power generation to the state and spark wholesale competition that would hold down prices paid by retail electric customers.

The panel also gave Florida investor-owned utilities an easy way to compete with the merchants: Utilities such as Florida Power Corp. and Tampa Electric Co. could sell their regulated plants at depreciated values to affiliates under the plan.

Critics charged the utilities would reap a windfall, buying plants on the cheap that were financed by customers.

The plants would fetch $15-billion on the open market, the Florida Municipal Electric Association estimated. That's $9-billion more than their book value -- money that should go to consumers, the association charged. Utility officials disputed the estimates.

Critics say the plant-sale deal is just one problem with the plan.

It would freeze base rates -- not including those for variable costs such as power plant fuel -- for three years.

That sounds like a good deal for the utilities' customers. But advocates for consumers and large industrial users say that would prevent them from negotiating reductions in rates that already are too high.

A settlement that froze Florida Power's base rate in 1997 expires July 1. The Florida Public Service Commission is reviewing earnings of the utility, whose parent company was purchased by Carolina Power & Light in November.

Officials of the new combined company, Progress Energy, headquartered in Raleigh, N.C., say the merger will produce at least $100-million a year in cost savings.

Public Counsel Jack Shreve, the state lawyer who represents ratepayers, and industrial power users say consumers should share in those savings. But the deregulation plan would lock in rates and prevent that.

"People were led to believe (the proposal) would protect them . . . but the time is ripe for a rate reduction," said John McWhirter, attorney for the Florida Industrial Power Users Group.

The proposal would benefit the big utilities in another way. Federal energy regulators ordered utilities across the country to form independent companies that would control transmission lines so power could flow unimpeded over large regions.

The commission's plan would let the state utilities pass their costs of creating the company for peninsular Florida, called GridFlorida, to consumers.

Representatives of the power companies, merchant plant operators and other parties are talking behind the scenes about tweaking the commission plan to make it more palatable to legislators.

"The whole issue has gone underground," said Sen. Tom Lee, a Brandon Republican who serves on the Florida Energy 2020 Commission but opposes the wholesale deregulation plan. "There's a lot of brainpower trying to thread that needle."

The proposals by Campbell, the Senate committee chairman, would open the market to merchant plants. But investor-owned utilities could sell their plants to affiliates only with approval of the Public Service Commission. The PSC also would decide on passing GridFlorida costs to consumers.

Florida Power regulatory chief Vincent Dolan was less than enthusiastic about Campbell's plan.

"It leaves a lot of unanswered questions about how you get new and existing generation into the market," he said. "We would have difficulty with it."

- Steve Huettel can be reached at huettel@sptimes.com or (813) 226-3384.

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