Dive Brief:
- Four Florida utilities, public counsel and consumer groups have agreed to put a hold on natural gas hedging programs, following $6.5 billion in losses since 2002, St. Peters Blog reports.
- In December 2015, the Public Service Commission allowed the programs to continue despite mounting losses, but regulators have now approved a joint stipulation that will halt hedging programs through 2017 while the parties investigate how they can be improved.
- Parties to the agreement will come together in one or more workshops to consider a reduction in hedging levels, use of different financial products, or terminating the programs completely.
Dive Insight:
Fuel hedging isn't designed to lower costs so much as reduce price volatility, but Florida regulators, consumers and utilities are now concerned that persistent losses mean something isn't working. In an stipulation filed last month, they agreed to a 100% moratorium on new hedges, and the utilities have withdrawn risk management plans proposed for next year.
The moratorium will not impact any hedges already in effect.
Parties to the agreement include Duke Energy Florida, Florida Power & Light, Gulf Power, Tampa Electric, Florida Public counsel, Florida Office of Public Counsel, Florida Retail Federation, and the Florida Industrial Power Users Group.
A proceeding last year determined Duke lost almost $1.5 billion over 13 years as a result of hedging; Tampa Electric lost $421 million; FPL lost $4 billion; and Gulf Power lost about $170 million.
But St. Petersburg Blog reports not everyone is in favor of halting the programs. PCS Phosphate-White Springs counsel James Brew said the company wanted to see hedging continue, especially in the light of potentially higher prices in the near-term, possibly due to rising exports.
“That’s not really addressing the customers’ needs here,” Brew said, according to SPB. “You have a circumstance in which it makes all the sense in the world to continue the process they’re doing. Instead, we’re going to do less of it or none.”
According to the agreement, the parties will negotiate a settlement related to the hedging issues in time for utilities to file 2018 risk management plants in August next year.
