This intransigent stance maddens large industrial energy users who increasingly are building their own power sources. Yet small businesses and consumer lobbies such as AARP say they're happy to be protected from the deregulation movement sweeping other states. Small electricity consumers don't anticipate benefits under deregulation. They worry costs will rise. It's too early to determine the long-term impact on homeowners and small businesses.
Behind the scenes, Florida's large utilities are orchestrating the do-nothing stance to create more time to prepare for competition. Florida Power & Light is speedily writing off regulated assets to build up cash reserves for a competitive environment and to reduce its risk of "stranded" costs, which are costs incurred under the monopoly system that may not be recovered under competition. In 1997, FP&L's accelerated depreciation of assets controlled by regulation totaled $221 million, up from $188 million in 1996.
Even smaller utilities are benefiting from Florida's shield from free market conditions. Utility bond rating firm Fitch IBCA specifically cited Florida's "go-slow approach to deregulation" as part of its reason for giving AA ratings to more than $200 million in bonds related to Tallahassee's municipal utility. Fitch analysts say Tallahassee has time to get ready for competition. Indeed, the municipal utility is in the process of retiring antiquated plants, cutting expenses and building a new 250-megawatt plant.
While there was virtually no new construction for years, many utilities now are rushing to build. Power companies say the increased capacity is for Florida's growing demand and potential shortages, but it's no secret many companies also want additional power for eventual open-market sales.
Florida's biggest players are expanding holdings outside the state and U.S. But so far, outsiders haven't cracked Florida's wall. The Public Service Commission rejected North Carolina-based Duke Energy Power Services' petition to build a plant with a Florida manufacturer. Now, Duke is battling to build a plant with the city of New Smyrna Beach. The large utilities have filed objections that may keep Duke's request tied up for a while. Under the plan, New Smyrna Beach would get 30 megawatts of energy a year, while Duke could sell the rest wholesale to other power suppliers.
Barring possible federal mandates, Florida, along with other Southeastern states, seems likely to stay on the sidelines of this new era in electrical energy. Mike Maloney, a Clemson University economics professor who follows deregulation, speculates that Florida could hold out for five years or more. "The utilities are awfully powerful," he says.
Industry News
- FPL Group Inc. (NYSE-FPL), parent company of Florida Power & Light, planned to buy a sizable amount of power generation in New England where deregulation is already underway. But now FPL wants to void a $846 million deal for 35 non-nuclear plants from Central Maine Power Co. FPL's retreat was prompted by a recent federal ruling that removed Central Maine's priority access to area transmission lines and would make it more costly for FPL to operate there.
- University of Florida's Public Utility Research Center, along with the World Bank, this month hosts utility specialists from dozens of developing countries, such as Latvia and Mexico, for training in utility infrastructure. It's also an opportunity for U.S. investors to gauge the political risks of global holdings.
- TECO Energy (NYSE-TE), parent of Tampa Electric Co., formed a joint venture with Houston-based Mosbacher Energy to build power plants worldwide. TECO's investment so far has been about $16 million. Previously, TECO's only plants outside Florida were in Guatemala. TECO expects a quick earnings boost from the partnership.
- Florida Power Corp. is seeking permission to speed up construction of a second, 500-megawatt Polk County plant, which it hopes to get running by 2001. Eventually, the Polk County power complex could generate 3,000 megawatts.
- Florida Power & Light wants regulatory approval to speed up its overhaul of plants in Fort Myers and Sanford. In the next 10 years, FP&L plans to increase its overall capacity, currently 18,700 megawatts,
by 14%.
- Jacksonville Electric Authority is refitting two 265-megawatt power plants with the latest technology for cleaner coal and petroleum coke burning. The $520 million project will be partly funded by a federal grant for $73 million. JEA says part of the environmental push is to build better relationships with community residents; such loyalty will be important if customers get to choose power suppliers.
- Gulf Power's eight-county Panhandle service area has had record customer growth in the last two years. The company added 10,545 customers in 1997, on top of 9,718 in 1996. The five-year average prior to 1996 was 6,933 annually. Gulf Power plans to build a 532-megawatt gas- fired facility in Panama City. The new plant is scheduled to go online in 2002.