Dive Brief:

• The Florida Public Service Commission has approved Florida Power & Light's request to use ratepayer funds to invest in up to 38 gas wells to be drilled in Oklahoma's Woodford Shale, Platts reports.
• This investment will provide a portion of each well’s output to meet an estimated 2.7% of FPL’s supply needs for its five 1,250 megawatt natural gas facilities and the sixth it is building.
• The FPL plan was opposed by Florida's Office of Public Counsel, which represents utility customers. No other utility has ever asked for a guaranteed rate of return on a fuel-related investment, OPC said. In approving the deal, the PSC required an independent third party audit of FPL-PetroQuest dealings.
   

Dive Insight:

This could be a decision of enormous importance if it becomes a precedent for regualtors elsewhere. As the popularity of natural gas as a lower emissions source of base load electricity sweeps up utilities across the country, the big obstacle is the historic and anticipated volatility of the fuel’s cost.

FPL uses up to 2 billion cubic feet of natural gas per day.Traditional hedging of fuel costs has limited impacts on natural gas's price volatility but co-ownership at the well with driller PetroQuest will, according to FPL, stabilize costs and save FPL's 4.7 million customers $51 million to $107 million over the 30-year life of the projects.

Those costs have always been absorbed by the utility through an unregulated subsidiary. That imposes on them the responsibility for finding the lowest cost option and has discouraged over-investment in in natural gas.

Covering the utilities' cost of drilling means ratepayers may pay for something they will never get, according to Vermont Law School senior economic analyst Mark Cooper. He called the proposal “socialism” because it eliminates all risk for FPL and shifts it to the utility’s ratepayers.