Dive Brief:
- Florida regulators will decide this week if utilities can continue to hedge large amounts of the gas they buy for electric generation, a practice opponents say has cost the state's consumers more than $6 billion since 2002.
- But staff of the Florida Public Service Commission is supporting utilities hedging programs, saying that despite losses, the strategy works to keep fuel price volatility to a minimum.
- Groups representing a broad range of consumers oppose the hedging programs, which have so far lost $4 billion for Florida Power & Light, the state's largest utility, according to the Tampa Bay Times.
Dive Insight:
Why do Florida utilities hedge gas purchases? The companies say it is to protect customers from natural gas price volatility, but the practice has reportedly cost them a combined $6.1 billion between 2002 and 2015.
This year alone, utilities lost some $789 million, the Tampa Bay Times reports.
The Florida Office of Public Counsel (OPC), Florida Retail Federation and the Florida Industrial Power Users Group all oppose the hedging programs. But while power users of all size clamor for state regulators to clamp down on hedging, the commission's staff has come out in favor of hedging programs. While they may not make the cost of energy lower, the staff says they can make it more predictable.
In the 13 years examined in the proceeding, Duke Energy Florida hedging lost almost $1.5 billion; Tampa Electric lost $421 million; FPL lost $4 billion; and Gulf Power lost about $170 million.
"The level of opportunity savings and costs – hedging gains and losses – should not be a chief consideration in deciding whether to continue fuel price hedging," staff said in its report. "When gas prices are falling, losses will occur. Conversely, when gas prices are rising, gains will occur. The main objective of IOU hedging programs is to reduce the customer’s exposure to fuel price volatility, not to reduce fuel costs."
While staff's recommendation is not binding, OPC told the Tampa Bay Times that the report probably means utilities will be able to continue hedging.
"I was certainly disappointed in the staff recommendation because it basically regurgitated the utility argument," Public Counsel J.R. Kelly told the newspaper. "And they just absolutely disregarded the customers."
