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PSC Has Denied $1.6 Billion FPL Gas Pipeline

In the Florida Public Service Commission’s first major decision since Gov. Charlie Crist shook up the panel by effectively firing two sitting commissioners, the PSC on Tuesday rebuked the state’s largest power company by rejecting its bid to build a new north-south natural gas pipeline in the state.

The PSC largely agreed with Florida Power & Light that an increase in gas transmission capacity will likely be necessary, but the panel voted 4-0 that the company’s proposed exclusive 300 mile line from Bradford County in northeast Florida to Martin and Palm Beach Counties was not the most cost-effective way to address the need for more fuel. If the plan had been approved, it would have been the third such portal for transmitting natural gas in the state.

The unanimous vote against FPL Tuesday was the PSC’s first without former Commissioner Katrina McMurrian, who resigned this week after Gov. Charlie Crist didn't reappoint her or PSC chairman Matthew Carter for another term, and may signal a shift in the way the panel deals with utilities moving forward.

The four remaining members of the panel all reached the conclusion that more gas will need to be able to be moved throughout the state in the future, but were hesitant to endorse FPL’s plan to build its own pipeline instead of purchasing capacity from existing operators like Florida Gas Transmission Co., which argued that the proposal would do more for the company’s bottom line than for customers.

“This is a pipeline just to serve FPL’s plans,” Commissioner Nathan Skop said. “You don’t have the open access you would have in normal pipeline. I think we definitely need additional capacity for natural gas in the state - that’s basic planning 101 – but if you have an exclusive pipeline and (if) something happens, those plants are dead in the water.”

In ruling that the FPL pipeline was not necessarily the best use of ratepayer dollars, the PSC adopted a minority view of its professional staff – and in doing so revealed an internal rift usually unseen by the public. The “primary” staff recommendation was that the pipeline was necessary because there was not sufficient capacity available to meet FPL's natural gas needs even considering modernizations to the company's facilities at Cape Canaveral and Riviera Beach.

That recommendation found that the new pipeline was the most cost-effective way to meet demand. But the "alternative" recommendation endorsed Tuesday by the PSC found that "the existing infrastructure has been reliable and there is no reason to believe it will somehow become unreliable."
“Do I think there’s obviously a need for some capacity? Yes,” Skop said during the PSC’s debate on the proposal’s merits Tuesday. “But I don’t know which project is best positioned to meet that need. I don’t want to be put in a position where I’m putting a gun to my head and being held hostage where if we don’t do this, we’re not energy secure, when we’re not. Time is not of the essence here and we have options.”

Commissioner Nancy Argenziano, who is likely to become chair of the PSC when Carter is replaced in January, agreed that the PSC did not have to rush to approve FPL’s pipeline plans.

“The questions I have are ‘is this a necessity?’ and ‘is FPL the entity to do this?’” Argenziano said. “Is this the time to do it? Does it have to be right now? Do we have any time to wait to see if (the economy) starts moving in an upward manner where ratepayers are not so affected? That’s what’s giving me heartburn.”

The PSC did not necessarily endorse FGT’s proposal to expand its own capacity by about another 100 miles to help meet the increasing need for gas transmission, which would have to be approved by a regulatory agency with intra-state jurisdiction. But Carter said that denying the pipeline proposal Tuesday did not mean the panel was endorsing the status quo.

“I don’t think we have to take the next step and tell (FPL) how to get the deal done,” he told the commission. “They need to tell us how they are going to get the deal done. They’ve said if they don’t get it in the rate base they’re not going to build it, but if they need gas, they’re going to get gas.”

After the vote, FPL said the PSC’s decision cast doubt on the state’s long-term energy future. The company maintained that its plan was more cost-effective than 60 proposals from seven companies FPL compared it to.

“We are very disappointed that, despite a lengthy, comprehensive and transparent process, the commission effectively denied the clear need for this investment and required that the entire process start over in order to go forward,” FPL President and CEO Armando J. Olivera said in a statement after the PSC’s decision. “All the evidence indicated that the Florida EnergySecure Line would be the most cost-effective and reliable method of increasing the supply of clean natural gas for our customers, diversifying the source of natural gas production beyond the Gulf of Mexico and enhancing the reliability of the electric system that serves half the population of Florida.”

The company had argued that the pipeline would have increased the availability of clean energy in the state and created 7,500 jobs in 14 counties if it went into service as scheduled in 2014.

FGT had requested the PSC stop or transfer to another state agency its decision on whether there was a need for the pipeline, saying an internal agency review of the process of how PSC staff reached a recommendation for the panel showed bias toward FPL.

But the commission ruled that because the review found no clear evidence of bias toward FPL, the case should go forward.

The PSC is slated later this month to continue deliberations on separate rate increase requests from FPL and Progress Energy.

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